After years of turbulence, the 2025 housing market is primed for a much-needed reset. With rising home sales, stabilizing mortgage rates, and a shifting landscape of buyer demographics, the market is shaping up to offer new opportunities for those looking to buy or sell. What’s driving these changes, and how can you make the most of them? From easing affordability challenges to the return of urban living, this year holds promise for a more balanced and dynamic housing environment. In this video, we’ll explore the trends, projections, and insights shaping real estate in 2025.
Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Andersen Realty Group
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Transcript:
After years of turbulence, the 2025 housing market is poised for a long-awaited reset. For buyers, sellers, and industry professionals alike, the landscape is shifting in ways that could open up new possibilities. Challenges from the past—like sky-high mortgage rates and limited inventory—are beginning to ease, setting the stage for a more balanced and active market. But what’s driving these changes, and how can you position yourself to succeed in this ever-changing environment? I’m Eric with Andersen Realty Group, and in this video, we’ll preview what’s ahead for the real estate market in 2025.
Rising Home Sales
The National Association of REALTORS® projects a significant rebound in home sales for 2025. Existing-home sales are expected to rise by nine percent year-over-year, while new-home sales could jump an impressive eleven percent. These gains mark a dramatic turnaround from 2023 and 2024, when high mortgage rates and affordability challenges sidelined many prospective buyers.
To what does NAR attribute this rebound? For one, job growth. NAR predicts the creation of nearly two million new jobs in 2025, offering economic stability and confidence to potential buyers. Also, having the presidential election behind us has removed some uncertainty, a fact that normally provides a post-election boost to home sales.
Homeowners, too, are playing a role in this recovery. With rising equity from years of price appreciation, more homeowners are listing their properties, easing inventory shortages and creating fresh opportunities for buyers.
Mortgage Rate Volatility
Few factors influence the housing market as much as mortgage rates. Over the past year, rates have fluctuated between about six point one percent and seven point four percent, creating a challenging environment for buyers. While most economists expect mortgage rate volatility going in to 2025, they also expect rates to stabilize at the lower end of this range, bringing some cautious optimism.
The Federal Reserve has already enacted two rate cuts in 2024 and is expected to lower rates further in the coming year. Yet, Yun warns that mortgage rates won’t decline in tandem with Fed cuts due to the federal deficit, which limits the availability of mortgage funding. This dynamic could keep rates higher than buyers might like, with averages likely hovering near six point eight percent.
As usual, activity will pick up whenever rates dip, and it will pull back when they rise. Buyers and sellers should both pay attention to these trends, as lower rates often translate to increased buyer activity. And yet, people continue to move, even when rates go up. Leases end, people relocate for work, and estates need to be sold, even when rates go up.
Home Prices: Modest Growth After Rapid Rises
After years of double-digit price increases, the pace of home price growth is finally slowing. The median home price is projected to rise just two percent in 2025. While this modest growth may disappoint sellers hoping for continued record-breaking gains, it offers a welcome reprieve for buyers grappling with affordability challenges, and it’s also good for the overall health of the market.
The deceleration in price growth reflects a better balance between supply and demand. Inventory is gradually increasing, thanks in part to more listings and a rebound in new construction. This is particularly significant given the pent-up demand created by years of limited housing availability.
Builders are also expecting regulatory easing under the new administration, which could increase the production of new homes. Their efforts could further stabilize prices and bring more options to the market, which is good for both buyers and sellers.
Changing Buyer Demographics
The profile of the typical home buyer is changing in response to economic pressures and shifting cultural norms. All-cash buyers have reached record highs, making up twenty six percent of sales. Many of these buyers are cashing in significant equity gains from prior homeownership.
First-time buyers are facing more challenges than ever. The median age of first-time buyers has climbed to thirty-eight, the highest on record. With high home prices and larger down payments—averaging nine percent, the highest in thirty years—these buyers often rely on family support or dip into retirement to afford their first home.
Multigenerational households have surged in popularity, reaching an all-time high and accounting for seventeen percent of sales. Cost savings and caregiving needs are the primary drivers behind this trend, as families combine resources to purchase homes.
Single women continue to outpace single men in the market, representing twenty four percent of home purchases compared to just eleven percent by single men. This reflects broader cultural shifts, including declining marriage rates and greater financial independence for women.
Another notable trend is the renewed interest in urban living. After a pandemic-induced migration to the suburbs, buyers are rediscovering the appeal of cities. This shift reflects both cultural preferences and improving urban infrastructure.
The “Lock-In” Effect and Mobility
A unique challenge of recent years has been the “lock-in” effect, where homeowners with ultra-low mortgage rates are reluctant to move. But in 2025, life events are beginning to overcome this.
Every year, millions of Americans experience milestones that require a move. About three and a half million babies are born each year, while one and a half million couples are married and around seven hundred thousand are divorced. On top of that, twenty five million people change jobs each year. These dynamics, coupled with growing inventory and stabilizing rates, are helping to loosen the gridlock that has constrained the housing market.
For buyers, this means more opportunities as motivated sellers enter the market. Sellers, meanwhile, should consider the needs of these diverse buyers when preparing their homes for sale.
Regional Highlights and Climate Impact
The 2025 market will vary widely by region, with notable trends emerging across the country. Buyers markets are expected to expand into the Southwest, where increasing inventory and affordability make these areas attractive. Meanwhile, the Midwest continues to draw buyers seeking stable prices and a lower cost of living.
Climate risks are also shaping regional dynamics. Coastal Florida and wildfire-prone areas of California are seeing the effects of climate-related risks on home prices. Rising insurance costs and property taxes are deterring some buyers, while others relocate to regions with fewer environmental hazards, like the Midwest and Northeast.
Homebuilding: A Key to Market Stability
The homebuilding sector is poised for growth in 2025, driven by both economic and regulatory factors. Builders anticipate fewer construction restrictions under the new administration, which could accelerate single-family and multifamily housing starts.
This uptick in construction is critical for addressing the supply-demand imbalance that has defined the market in recent years. While it will take time for these efforts to significantly impact affordability, they represent a step toward a more sustainable housing market.
Conclusion: A Year of Renewal
The 2025 housing market is expected to offer a much-needed blend of stability and opportunity. With rising home sales, stabilizing mortgage rates, and evolving buyer demographics, the year ahead promises a fresh chapter for real estate. Whether you’re looking to buy your first home, sell and upgrade, or invest in a growing market, understanding these trends will be key to making informed decisions. For the millions of Americans navigating the market, 2025 could be the year to move forward with confidence. If you are looking for help selling or buying a home in the western suburbs of Chicago, reach out using my contact information below, and if you found this video helpful, be sure to like this video, subscribe to my channel, and turn on notifications. I’m Eric with Andersen Realty Group, a family-owned brokerage where we treat our clients like family.