What Top Economists Are Predicting for the 2025 U.S. Housing Market

Real estate has long been considered one of the safest investments. As Franklin D. Roosevelt once said, "Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world."

Heading into the second half of 2025, while home prices are expected to continue rising, experts agree the pace of appreciation is slowing, giving buyers in some markets more breathing room and leverage.

Home Prices in 2025: Slower Growth, but No Crash

Most forecasts project a national home price increase of 2% to 4%, with variation by region. While markets in certain parts of Florida and Texas are seeing a surge in inventory, much of the Northeast continues to face low supply. Overall, it’s a more moderate pace of growth compared to the record-breaking surges of recent years. According to Robert Dietz of the National Association of Home Builders, rising inventory and more cautious buyers are softening price growth. In some areas, particularly those with abundant resale listings, prices may even decline.

Selma Hepp of CoreLogic notes that new supply is creating balance, which helps ease upward pressure on prices. However, in high-demand markets with limited inventory—like parts of California, Texas, and Florida—steady price increases are still likely.

Inventory Is Rising—But Not Enough

While listings are up, the U.S. still faces a significant housing shortage, especially in affordable segments. Danielle Hale of Realtor.com describes the current climate as “very, very difficult” for buyers, especially younger generations. She emphasizes the need for more new construction to meet demand and preserve affordability.

Even if inventory grows, the current supply still falls short of meeting long-term household formation trends, particularly in urban and coastal areas. A mortgage rate drop could reignite demand and flip the market again.

Interest Rates: When Will Relief Arrive?

Mortgage rates have been hovering around 7%, pricing many buyers out of the market. Experts forecast that rates may fall slightly by year-end, possibly landing between 6% and 6.5%, according to Lawrence Yun of the National Association of Realtors. However, any rate drops will likely be slow and modest, as the Federal Reserve remains cautious about inflation.

The Fed funds rate, currently at 4.3%, indirectly impacts mortgage rates. Compared to historical averages—1.7% over 20 years, 2.5% over 30 years, and 3.2% over 40 years—today’s rates remain elevated.

Sellers Are Patient, Buyers Are Cautious

Sellers, by and large, are not in distress. Mortgage default rates remain near historic lows. Most homeowners have substantial equity and low locked-in mortgage rates, making them less likely to sell unless necessary. Yun notes, “Home sellers can be patient.”

At the same time, buyers are navigating affordability challenges. Many homes are listed too high, leading to longer time on market and more frequent price reductions. Daryl Fairweather of Redfin explains, “Buyers can’t afford these high prices, and they’re backing off. Sellers will either lower prices or delist.”

What to Expect by the End of 2025

Mark Zandi of Moody’s predicts that home prices will flatten in many regions, with some corrections in overvalued southern and western markets. However, there is no widespread crash expected—low inventory and strong homeowner equity provide a buffer.

Chen Zhao of Redfin adds that 2025 will likely resemble 2024, with prices rising modestly around 4%, and rates remaining volatile. The biggest driver of change remains mortgage rates. Even a small dip can have a major impact on buyer demand and market momentum.

The Bottom Line: Is Now a Good Time to Buy or Sell a Home?

There’s no one-size-fits-all answer. In many ways, it’s a tale of two markets. Sellers with equity and desirable properties in high-demand areas can still expect strong returns. Buyers, especially first-time homebuyers, have more leverage today than in years past—but they’ll need to shop smart and negotiate carefully.

As Will Rogers wisely put it, “Don’t wait to buy real estate. Buy real estate and wait.” The long-term outlook for real estate remains strong. For those ready to make a move, 2025 could offer new opportunities—especially in markets where inventory is rising and sellers are becoming more flexible.

Need help navigating the 2025 housing market in Los Angeles or Santa Monica? Whether you’re a first-time buyer, investor, or downsizer, let’s create a strategy that works for your goals. Contact me today for a consultation.