2025 Housing Predictions laura garcia jacksonville keller williams

Five Real Estate Predictions for 2025

In 2024, we survived two major hurricanes, the presidential election, a 50% increase in housing inventory, and extended 7 percent interest rates. 2024 was the first year that control of the market started to shift to buyers’ hands.

Buyers had the upper hand in negotiations as homes sat on the market and sellers’ desperation to sell grew. The realization that interest rates would not fall caused more potential buyers to stay put and make their current home (and 2.5% mortgage rate) work for them. As the pool of potential home buyers decreased, most real estate markets grew from the common one month of inventory during covid times to 6 months or more of available homes. This trend continues as we near the end of 2024.

What is in store for the real estate market in 2025? My crystal ball is currently in the shop, but below are some thoughts mixed with “expert opinions” to help inform your 2025 real estate planning. Don’t hesitate to reach out to discuss anything in more detail!

1. Mortgage interest rates will not drop significantly: We have all been waiting for the drop in rates that was promised in 2024. As the cost of living and inflation continues to be an issue, interest rates will likely not take a significant dive in 2025. Mortgage rates under five percent should continue to be viewed as unusual, rather than the norm.

Jordan Boyack, from Prosperity Home Mortgage, shares her thoughts: “It’s late December. All of the 2025 mortgage rate forecasts have been published. Unfortunately, most (if not, all of them) are already incorrect. Most housing market analysts expect mortgage rates to spend 2025 in the 6’s. The most optimistic predictions assume 2025 will see mostly low 6’s for the 30-year fixed rate mortgage. Rates could still ease down, and probably will at points during the year. However, it is notable that 2025 is about to start with mortgage rates in the 7’s. Unfortunately for homebuyers in 2024, mortgage rates have stayed higher for longer than anyone expected. Mortgage rates, as tracked by Freddie Mac, averaged 6.72% for 2024. Point being – if you can afford a mortgage comfortably now, it’s time to bite the bullet. You can always refinance when and if rates decline!”

2. Total Cost of Ownership Will Become More Important: If you have paid for a new roof recently, then you know that housing costs have grown substantially. With rising costs for property taxes, home insurance, and maintenance, the total costs for homeownership are far more than just mortgage principal and interest payments alone. As costs continue to rise, home buyers will need more saved to account for these higher priced expenses. Increases in these other areas are starting to affect the housing market and buyer affordability.

According to a study in mid-2024 by Bankrate, these annual variable costs for a typical single-family home rose by nearly 26% between March 2020 and March 2024 to over $18,000 per year, or $1,510 per month. Add to this the cost to finance the median-priced single-family home of $2,278 per month, and the total cost of ownership rises to nearly $3,800 per month. As a point of comparison, renting a typical single-family home in March 2024 was $2,236 per month, or 30% less. It is because of this cost differential that so many would-be homebuyers are preferring to rent.

3. 2025 Will Be a Renter’s Market: Many Americans will remain renters or become renters. While the cost of buying a home will increase, rental affordability will improve. The median U.S. asking rent is expected to remain flat year-over-year in 2025. That will make rent payments more affordable to the typical American when compared to the cost of purchasing a home. 

There will also be more new rentals coming on the market, with many of the units builders started working on during the pandemic apartment-building boom coming to fruition. This will create more supply than demand, motivating landlords to offer concessions like free parking, a free month of rent, more amenities or a hiatus on rent increases in order to retain residents. With rents flat or maybe even down next year, and home prices rising as rates are likely to stay high, the affordability gap between renting and buying may widen. 

4. The Move-Up Buyer Will Stay Put or Choose to Pay Cash: Typically, a homeowner would stay in an entry-level home for 6 to 8 years before upgrading to a larger home. With the sizable housing equity gains many owners have experienced, all-cash buyers have surged to record highs, accounting for 26% of home sales over the past year. Thirty-one percent of repeat buyers paid all-cash for their next home purchase. For those homeowners who cannot cash out for an upgraded home, we will likely see more renovations and additions being built to existing homes. Similar to the COVID boom in home projects, we will likely see a smaller scale boom as homeowners choose to upgrade their current home rather than take on a larger mortgage at a higher rate.

5. Florida’s Condo Market Will Improve in 2025: The Florida condo market has taken a major hit since the Surfside collapse in 2021. Regulations on reserves, repairs, and other structural report requirements have taken condo communities by surprise. The increased monthly costs and special assessments have forced many condos on the sales market as fixed-income retirees cannot afford the new expenses. According to data provided by the Florida Realtors Association, inventory of condos and townhomes across the state increased 65% in the third quarter of 2024 compared with the year prior. There were 60,132 active listings equating to 7.4 months supply. For reference, a year earlier, there was just 4.1 months supply in the condo market. Although the new laws will benefit future owners, the current changes are causing a ripple effect that is negatively impacting the condo market. This ripple effect is expected to continue into 2025 but may soften as more condo associations get into compliance with the new laws and as new owners that bought knowing the higher monthly fees move into the complex.

Check out the articles below for more in-depth information on 2025 Predictions:

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