Here's what to watch for in the 2025 housing market

Housing is not cheap – whether you buy or rent.

In October, the median sales price of a single-family home in the United States was $437,300, up from $426,800 the previous month, according to the latest data from the U.S. Census.

Meanwhile, the median U.S. rental price was $1,619 in October, roughly flat or up 0.2% from a year ago and down 0.6% from the previous month, according to Redfin, an online real estate brokerage.

While it may be difficult to pinpoint exactly how the housing market will fare in 2025, several economists have made predictions for what could happen next year in a new report from Redfin, an online real estate brokerage.

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“If the housing market was going to collapse, it would have already collapsed by now,” said Darryl Fairweather, chief economist at Redfin. “The housing market has been very resilient to record-high interest rates.”

Here are five housing market predictions for 2025, according to Fairweather and other economists.

The median asking price of a home in the U.S. will likely rise 4% over the course of 2025, a pace similar to that seen in the second half of this year, according to Redfin.

The 4% annual pace is a “normalization” compared to the accelerating growth last seen in 2020, Fairweather said.

Earlier in 2024, the rate of home price growth slowed to pre-pandemic levels. In other words, while prices were still rising, the speed of price growth was not as fast as in previous years.

Despite expectations of a slowdown in growth, there will likely remain some price fluctuations.

In fact, home price appreciation may remain flat, or less than 1%, going into the spring 2025 homebuying season, said Selma Heap, an economist at CoreLogic.

The possibility of President-elect Donald Trump enacting some of his economic policies could cause home prices to rise significantly, said Jacob Channel, chief economist at LendingTree.

“We have kind of mixed signals right now in terms of what may or may not happen to home prices,” he said.

General tariffs on foreign goods and materials, as well as mass deportations, could lead to higher construction costs and a slowdown in homebuilding activity. If fewer homes are built in a market with limited supply, prices could rise significantly, Channel said.

Nationally, the median asking rental price in the U.S. will likely remain flat over a year in 2025, as new rental inventory becomes available, according to Redfin.

“If rents are flat, and people's wages continue to grow, that means people have more money to spend,” as well as increasing their savings, Redfin's Fairweather said.

More than 21 million renter households are “cost burdened,” meaning they spent more than 30% of their income on housing costs, according to 2023 U.S. Census data.

A stable rental market will also give tenants more power to negotiate with landlords. In some areas, property managers are already offering perks like one month's rent for free, a free parking space, or waiving fees, experts say.

However, the channel said: “It's December.” “Rent prices typically decline in the colder months of the year, as fewer people are looking for an apartment in the late fall and winter seasons.

If potential buyers continue to be priced out of the seller's market next year by rising home prices and mortgage rates, competition could arise in the rental market, he said.

Also keep in mind that the typical rental price you see will depend on what's happening in your local market, Hipp explained.

For example: Austin, Texas was a “multifamily construction hub,” which meant a lot of new supply was added to the city's rental market, resulting in lower rental costs. CoreLogic found that rent prices in the metro area were down 2.9% compared to last year.

In contrast, supply-constrained urban areas, such as Seattle, Washington, D.C., and New York City, are seeing high rent growth of 5% annually.

Redfin expects mortgage interest rates to average 6.8% in 2025, hovering around the low 6% range if the economy continues to slow.

However, experts expect 2025 to be a “bumpy” and “volatile” year for mortgage rates.

Borrowing costs for home loans could rise if policies such as tax cuts and tariffs are enacted, putting upward pressure on inflation.

“We're kind of in uncharted territory. It's really hard to say exactly what's going to happen,” LendingTree said.

Mortgage rates fell this fall in anticipation of the first rate cut since March 2020. But then borrowing costs jumped again in November as the bond market reacted to Donald Trump's election win. Since then, mortgage rates have stabilized somewhat – for now.

“Our projection is that rates will be in the 6% range as we move into 2025,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, told CNBC.

Pent-up demand from buyers and sellers on the sidelines could drive home transactions next year.

“People have waited long enough,” Fairweather said.

About 4 million homes are expected to be sold by the end of 2025, a 2% to 9% annual increase from 2024, according to Redfin.

The market is crowded with “people who need to move on with their lives,” such as buyers who are getting new jobs and need homes suitable for life changes, and sellers who have delayed moving plans, Fairweather said.

While more buyers are expected to hit the market next year, the level of competition may not be as intense as in recent years, when bidding wars were the norm.

Other factors may have an impact on affordability, such as rising insurance costs and property taxes, which in turn slow competition, said CoreLogic's Hipp.

“We will definitely see more buyers there,” she said. “But I don’t see the competition intensifying to the levels it has been over the past few years.”

Redfin expects that the threat of extreme weather and natural disasters could cause home prices to decline or slow price growth in areas such as coastal Florida, California and parts of Texas, which are at high risk of hurricanes, wildfires or other disasters.

If palatable prices have you eyeing homes in a high-risk market, be aware of the potential complications.

For example, home insurance policies are difficult to obtain in some of these markets, and they tend to carry high rates. The financial impact of natural disasters may also be felt in higher home maintenance and repair costs, Redfin's Fairweather said.

What's even more difficult, she added, is that “every part of the country is at risk” because weather patterns are changing. “Recently, there have been weather rivers in California that have caused days of heavy flooding, and those homes were not built for that purpose.”

While there is a lot of focus on Florida regarding hurricane risk, the state is much more prepared for this natural disaster, unlike areas like Asheville, North Carolina, a mountain city that was struck by Hurricane Milton earlier this year.

“We are likely to see an increase in insurance on a very large scale because of the mismatch between what homes were built for and the climate they will face in the coming years,” she said.