Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again?

As 2024 winds down, the housing market remains as unpredictable as ever. Mortgage rates hover closer to 7% than 6%—far from what most economists and analysts forecasted and above the rates we saw the first week of the year. Record-high home prices also continue their ascent in many areas of the country.

However, recent indicators suggest there’s hope for relief in 2025. The surge in home prices has slowed and even declined in some markets, thanks to increasing inventory and softer demand due to affordability challenges. Experts project this price deceleration to persist in 2025.

Yet, even as many would-be buyers are holding out for better conditions in 2025, pending sales remarkably continue to rally. This indicates more prospective buyers may be resigned to the current reality and re-entering the market.

Housing Market Forecast 2025

U.S. home prices posted a 3.9% annual gain in September—down from 4.2% annual growth in August, according to the latest S&P CoreLogic Case-Shiller Home Price Index, which tracks single-family home values. This latest data represents the sixth consecutive month of annualized price deceleration after national home price growth peaked at 6.5% in February and March.

Selma Hepp, chief economist at CoreLogic, a global property analytics provider, noted in her analysis that cooling will likely continue through mid-next year and slow to 2.3% by August 2025.

Conditions for Buyers Could Improve in 2025

Even with the slowing pace, home prices remain out of reach for many would-be buyers. Median existing-home prices have surged by roughly 40% over the past five years amid rising mortgage rates, which remain elevated.

Principal and interest payments are currently 82% higher than they were before the Covid-19 pandemic, according to Hepp. Add property taxes and insurance to that and it’s understandable why homeownership is out of reach for many. Nonetheless, experts view the recent slowdown in price growth as an encouraging indicator that this trend—which is tilting in favor of buyers—will likely persist.

“[T]ogether with lower mortgage rates next year, as many are forecasting, a slowdown in price increases could mean markedly improving conditions for buyers in 2025,” said Robert Frick, corporate economist with Navy Federal Credit Union, in an emailed statement.

Will the Housing Market Crash in 2025?

With record-high home prices still trending upward in many markets, you may be concerned that we’re in a bubble that’s prime to pop, as it did in the 2008 financial crisis. However, the likelihood of a housing market crash (a rapid drop in unsustainably high home prices due to waning demand) remains low as we look ahead to 2025.

“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a nonqualified mortgage lender.

Experts are also quick to point out that today’s homeowners are on much more secure footing than those coming out of the 2008 financial crisis, with many having substantial home equity. What’s more, a record number of homeowners today are mortgage-free.

“The 2008 housing market crash was a result of a unique set of circumstances that aren’t present in today’s market,” Amy Lessinger, president at RE/MAX, LLC, tells Forbes Advisor. “Back then, widespread risky lending practices, subprime mortgages and an oversupply of homes contributed to the collapse.”

Is Buying a Home Still a Safe Strategy?

Lessinger emphasizes that housing remains a reliable long-term investment, with trusted real estate agents playing a key role in navigating changing market dynamics and helping clients make well-informed decisions based on their individual financial situations and timing.

Jess Schulman, president and COO at Bluebird Lending, agrees with the unlikelihood of a housing market crash in 2025, noting that all indicators suggest a more robust economy and that further Fed rate cuts are in store. The Federal Reserve slashed the benchmark federal funds rate by 50 basis points in September and then by another 25 basis points in November. Note that one basis point is one one-hundredth of a percentage point.

“Mortgage rate reductions should create more transactions and could result in home price increases because of pent-up demand,” Schulman says.

How Much Are New Homeowners Paying Monthly for a Median-Priced Home?

While the Fed doesn’t set the interest rates that borrowers pay on mortgages, its actions have an indirect impact. Consequently, mortgage rates declined in anticipation of the Fed’s first interest rate cut in September—but that descent turned out to be short-lived.

Rates steadily declined through September, ending the month at 6.08%. After this, the national average 30-year mortgage rate began a stark run-up in October and November—reaching the upper 6% range and further crimping affordability for home buyers.

“While lower mortgage rates are widely anticipated by home shoppers, reality has not played out as expected,” noted Danielle Hale, chief economist at Realtor.com, in an emailed statement.

Keep in mind that home prices vary regionally, though, meaning there are affordable options available if you are flexible and know where to look. For instance, Zillow data reveals that shoppers can find a typical home in areas such as Pittsburgh, Cleveland and Birmingham for under $250,000.

Can We Expect a Housing Market Recovery in 2025?

For a housing recovery to occur, several conditions must unfold.

Housing Inventory Needs To Increase

“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” Keith Gumbinger, vice president at online mortgage company HSH.com, tells Forbes Advisor. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”

Mortgage Rates Need To Fall

Mortgage rates also need to decline. Although rate movements have been uncooperative in recent months, experts are hopeful for some improvement over the next year.

Even so, Gumbinger warns that rates cooling too quickly could create a surge in demand that would wipe away any inventory gains, causing home prices to surge. He adds that mortgage rates eventually returning to a more “normal” upper-4%-to-lower-5% range would be helpful to the housing market but predicts it could be a while before we return to those rates.

Housing Supply Holds the Key To Recovery

Meanwhile, experts see little risk of mortgage rates cooling quickly. Instead, they continue to sound the alarm about historically low inventory as Millennials and other young adults strive to enter the housing market.

The Economic & Housing Research group at Freddie Mac stated in its November Economic, Housing and Mortgage Market Outlook that they anticipate mortgage rates to gradually descend throughout 2025. This will help loosen the lock-in effect, increasing inventory and boosting sales.

Home price growth will also likely continue in 2025, but the pace will slow—the evidence of which we have already seen in recent months. However, the group highlights that limited housing supply remains the biggest obstacle to a housing market recovery. Expanding inventory through new construction combined with other viable solutions remains critical for improving affordability.

Housing Inventory Forecast: When Will There Be Sufficient Supply To Reduce Prices?

Despite more resale and new homes entering the market, for-sale inventory remains well below pre-Covid averages, according to a Freddie Mac report. Thanks to multiple headwinds, a severe inventory deficit will likely remain for some time.

For one, many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will until mortgage rates resume their descent enough to loosen the lock-in effect.

“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.

Meanwhile, President-elect Trump has expressed support for rolling back regulations to facilitate new home construction and plans to open limited portions of federal land for housing development. Yet, while these strategies could potentially boost inventory, analysts say they’re unlikely to significantly move the needle toward creating a more affordable and balanced housing market.

Here’s what the latest home values look like around the country.

Home Builder Sentiment Continues Upward Trend Post-Election

Builder sentiment remains on a roll—at least for now. The most recent improvement may be related to the outcome of the election, as builders view a full Republican control in Washington D.C. as a boon for the new construction realm.

Builder Confidence Rising

According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence rose from 43 to 46 in November. A reading of 50 or above means more builders see good conditions ahead for new construction.

Although builder sentiment has remained in negative territory since April, November marks the third consecutive month of gains in the index.

“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments,” said Carl Harris, chairman of NAHB, in a press statement.

Despite the improved outlook, NAHB chief economist Robert Dietz cautions that uncertainties remain. “While builder confidence is improving, the industry still faces many headwinds, such as an ongoing shortage of labor and buildable lots along with elevated building material prices,” he said.

New Home Completions Dip

Despite the brightening sentiment, a cloud hung over single-family home-building in October.

“Recent mortgage rate volatility serves as a reminder that elevated financing costs could temper a broader housing market recovery,” said Odeta Kushi, deputy chief economist at First American, in an emailed statement.

Housing starts for single-family homes in October were down 6.9% month-over-month and 0.5% from a year ago, according to the latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD). New home completions were down 1.4% month-over-month and 0.2% from September 2023.

Residential Real Estate Stats: Existing, New and Pending Home Sales

Resale and pending home sales came in strong in October, but new home sales sagged. Here’s what the latest home sales data has to say.

Existing-Home Sales

Existing home sales—completed transactions of single-family homes, townhomes, condominiums and co-ops—rebounded in October, just as mortgage rates began to resume their climb. After several up-and-down weeks, the average mortgage rate for a 30-year loan was 6.72% for the week ending December 19.

Nonetheless, after hitting a 14-year low in September, monthly existing home sales rose 3.4% in October and 2.9% year-over-year. This put the seasonally adjusted annual sales rate at 3.96 million (up from an abysmal 3.83 million in September) and marked the first annual sales increase since July 2021, according to the latest report from the National Association of Realtors (NAR).

This latest sales improvement comes as the national median resale home price rose 4% to $407,200 compared to a year ago, marking the 16th straight month of year-over-year price growth. All four major U.S. regions experienced median home price increases.

Affordability Challenges Could Stabilize in 2025

Though Lawrence Yun, chief economist at NAR, acknowledged in the report that first-time home buyers continue to face affordability challenges, namely due to high mortgage rates, he expects rates to stabilize next year.

“The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions,” Yun said.

The latest NAR data shows inventory ticked up slightly month-over-month, rising 0.7% between September and October and 19.1% from a year ago. At the current monthly sales pace, unsold, existing inventory stands at a 4.2 months’ supply, down from 4.3 months. Most experts consider a balanced market between four and six months.

New Home Sales

Meanwhile, new home sales took a nosedive amid deteriorating affordability, severe storms and election uncertainty. October sales of newly constructed single-family houses plummeted 17.3% compared to September and 9.4 % compared to a year ago, according to the latest U.S. Census Bureau and HUD data. This decrease marked the lowest annualized seasonally adjusted new home sales since November 2022.

Lisa Sturtevant, chief economist at BrightMLS, noted that new home sales may face continued headwinds in the coming months. For one, mortgage rates may not decline as much as expected. Moreover, resale inventory is finally loosening.

“When existing home inventory was at a record low, some buyers had no other option but a new home,” said Sturtevant in an emailed statement. “Now, however, buyers have more options.”

Recent Home Sales Data

Pending Home Sales

Prospective buyers were apparently undeterred by mortgage rates creeping back up toward spooky highs. NAR’s Pending Homes Sales Index rose 2% in October compared to September, marking the third consecutive month of increases to the forward-looking gauge. Pending transactions expanded at a 5.4% annualized rate. All four major U.S. regions experienced growth both monthly and annually.

Note that a pending home sale marks the point in the purchase transaction when the buyer and seller agree on price and terms and is considered a leading indicator of a closed existing home sale within the next one to two months.

“Home-buying momentum is building after nearly two years of suppressed home sales,” said Yun in the report.

As mortgage rates crept up, resale supply broadened—helping to temper existing home price growth and improve affordability. Annual gains were especially strong in the pricier Northeast and West regions, which Yun explains was the result of a record-high stock market giving high-end home buyers a boost.

Will There Be a Foreclosure Surge in 2025? Here’s What Experts Say

Lenders began foreclosures on 20,950 properties nationwide in October, up 6% from the previous month but down 10% from last year, according to real estate data firm Attom.

Completed foreclosure data was also mixed, with real estate-owned properties, or REOs, increasing by 12% compared to the previous month but down 12% from a year ago. REOs are homes that didn’t sell at foreclosure auctions, with mortgage lenders ultimately taking possession.

Foreclosures Seem To Be On the Rise

Foreclosure activity still hovers at historic lows. However, with foreclosure starts and completed foreclosures both inching up last month, experts remain vigilant—monitoring multiple economic variables that could introduce stress in the housing market.

“As we approach 2025, the recent Fed rate cut and the new administration could impact mortgage rates and market stability,” said Rob Barber, CEO at Attom. “While seasonal factors may slow things down briefly, we’ll be watching closely to see how these recent dynamics affect the market in the coming year.”

Foreclosure activity in the first half of 2024 was only 50% of the activity in the same period in 2019, which was already at low levels, according to Attom data.

Home Equity Levels Impact Foreclosure Levels

Sharga explains that a significant factor contributing to today’s comparatively low levels of foreclosure activity is that homeowners—including those in foreclosure—possess an unprecedented amount of home equity.

Homeowners with mortgages saw a collective increase of $1.5 trillion in home equity, lifting total net homeowner equity to over $17 trillion in Q1 2024, the highest figure since late 2022, according to the latest CoreLogic home equity report.

Indeed, more homeowners are getting richer. The percentage of equity-rich mortgages (when an outstanding mortgage balance is at or below 50% of a home’s value) was up annually in 37 states during the third quarter of this year, according to Attom.

“For a homeowner in the early stage of foreclosure, that equity helps them avoid a foreclosure sale, either by leveraging the equity to pay down past due mortgage bills, or by selling their property in order to protect the equity they’d otherwise lose at the auction,” Sharga says.

Will 2025 Be Better To Buy a Home?

Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.

Use a mortgage calculator to estimate your monthly housing costs based on your down payment. But if you’re trying to predict what might happen in 2025, experts say this is probably not the best home-buying strategy.

“The housing market—like so many other markets—is almost impossible to time,“ Orphe Divounguy, senior macroeconomist at Zillow Home Loans, says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”

Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.

“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”

Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.

Pro Tips for Buyers and Sellers

Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.

Pro Tips for Buying in Today’s Real Estate Market

Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:

• Know your budget. Instead of focusing on price, figure out how much you can afford as a monthly payment. Your monthly housing payment is influenced by the price of the home, your down payment, mortgage rate, loan term, home insurance and property taxes.
• Be flexible about home size and location. Perhaps your budget is sufficient for a small home in your perfect neighborhood, or a larger, newer home further out. Understanding your priorities and having some flexibility can help you move quickly when a suitable home enters the market.
• Keep an eye on the market where you hope to buy. Determine the area’s available inventory and price levels. Also, pay attention to how quickly homes sell. Not only will you be tuned in when something great hits the market, you can feel more confident moving forward with purchasing a well-priced home. A real estate agent can help with this.
• Don’t be discouraged. Purchasing a home is one of the largest financial decisions you’ll ever make. Approaching the market confidently, armed with good information and grounded expectations will take you far. Don’t let the hustle of the market convince you to buy something that’s not in your budget, or not right for your lifestyle.

Pro Tips for Selling in Today’s Real Estate Market

Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:

• Research comparable home prices in your area. Sellers need to have the most up-to-date pricing intel on comparable homes selling in their market. Know the market competition and price the home competitively. In addition, understand that in some price points it’s a buyer’s market—you’ll need to be prepared to make some concessions.
• Make sure your home is in top-notch shape. Homes need to be in great condition to compete and create a strong “online curb appeal.” Well-maintained homes and attractive front yards are major features that buyers look for.
• Work with a local real estate agent. A real estate agent or team with a strong local marketing presence and access to major real estate portals can offer significant value and help you land a great deal.
• Don’t put off issues that require attention. Prepare the home by making any repairs or improvements. Removing any objections that buyers may see helps focus the buyer on the positive attributes of the home.

Frequently Asked Questions (FAQs)