The 2024 U.S. real estate market started off promising, with mortgage rates cooling from 2023 highs. However, by the spring, the average 30-year fixed rate was over 7% again. This brought on a slower-than-usual spring market, where many buyers took to the sidelines waiting for interest rate relief. Home sales remained relatively flat throughout the rest of the year. Will this trend continue into the new year, or will 2025 be the year buyers return?
We talked with Kendall Bonner, eXp Realty’s VP of Industry Relations, to find out what home buyers and sellers can expect for the 2025 U.S. real estate market.
Existing Homeowners Will Lead the Market
Rising costs of living—with average monthly household expenses increasing from $6,081 in 2022 to $6,440 in 2023—have undoubtedly impacted younger generations’ ability to purchase a home. According to the National Association of Realtors’ 2024 Profile of Home Buyers and Sellers, the median age of first-time home buyers has reached an all-time high of 38, and first-time buyers made up just 24% of all buyers last year, a historic low.
As a result, next year’s pool of buyers will largely consist of existing homeowners. “With the current challenges first-time homebuyers face in saving for a down payment, we’re unlikely to see a significant increase in first-time home buyers unless there’s a dramatic drop in interest rates,” says Bonner. “Instead, there will be an increase in purchases by existing homeowners, and since these buyers are also sellers, we can anticipate steady pricing as supply and demand remain relatively balanced.”
Increased Movement to Unlock More Housing Inventory
Lifestyle and employment changes will be one of the factors driving inventory increases next year as many people decide to relocate closer to their jobs or to align with personal preferences. With a few years now passed since their pandemic-era purchases, many homeowners may feel it’s time to reevaluate their homes—especially if economic indicators look favorable.
“I think inventory is going to increase across the country because there’s going to be more movement. Many homeowners who purchased in 2020 and 2021 as a result of the pandemic are now reconsidering their long-term plans and may look to move elsewhere,” suggests Bonner. “Additionally, as more employers transition away from remote work, people are likely to relocate to be closer to their jobs, creating further movement in the market.”
It’s not just employers who are driving the return to in-person work, either. A survey by Resume Builder found that seven in ten employees don’t want to be fully remote, citing social interaction, faster communication, and easier collaboration as the main reasons. This desire to return to in-person work will prompt many to relocate, bringing much-needed inventory back to the market.
According to the latest data from NAR, the national single-family home inventory has increased from just 760,000 homes in 2021 to 1,210,000 in September 2024. Several large metros, including Denver, Orlando, and Austin, are also seeing a welcome spike in housing supply, with inventory increasing by over 200% from 2021 to 2024. Buyers returning to the market after purchasing in 2020 or 2021 will find a more balanced environment compared to the intense conditions of the pandemic period.
Beyond personal motivations, an optimistic economic outlook could encourage even more people to move. “If people feel confident about the economy, they’ll view this as an opportune time to sell and move to places that better fit their lifestyle or proximity to work,” adds Bonner.
Rising Inventory Set to Keep Home Prices in Check
“As inventory levels rise next year, home prices will likely stabilize,” says Bonner. “With many buyers also stepping into the market as sellers, we can expect a more balanced environment where prices hold steady rather than skyrocketing as they have in previous years.”
The national median single-family home price reached an all-time high of $422,100 in Q2 2024 but has since slipped to $418,700 in Q3 2024, according to NAR. During the same period last year, the national median price increased by 0.9%, suggesting that price appreciation is slowing.
However, some single-family housing markets remain competitive, with fifteen markets experiencing double-digit price increases from 2023, including Racine, WI (13.7%), Syracuse, NY (13.0%), and Springfield, IL (12.3%). On the other hand, a few markets are experiencing year-over-year price drops such as Denver, CO (-2.7%), Sarasota, FL (-5.8%), San Antonio, TX (-3.3%), and Tampa, FL (-1.2%).
A recent report from CoreLogic also points to the likelihood of home prices declining over the next 12 months in Provo-Orem, UT; Atlanta, GA; Salt Lake City, UT; Gainesville, FL; and Palm Bay, FL. Prospective homebuyers should work closely with a local real estate agent to better understand market conditions in their area.
The Spring Market Will Be More Typical
Despite being the busiest time for real estate, the spring market of 2024 was subdued as increasing home prices and high mortgage rates prevented many buyers from entering the market. This resulted in several markets experiencing year-over-year sales declines, notably in the country’s three most populous states—California, Texas, and Florida—which all experienced drops in home sales in May 2024. However, with inventory building, there’s hope for improved conditions next year.
“This year’s spring market was tough and lacked its usual energy,” says Bonner. “Next year, I think we’ll see a more traditional spring market, with increased activity and better opportunities for both buyers and sellers.”
Mortgage rates will also play a role in influencing buyer sentiment next year. Fannie Mae projects that the 30-year mortgage rate will steadily decline to 5.7% by the end of 2025, offering some relief from current rates above 6.7%.
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