The Housing Market in 2025: Expert Forecasts

Looking at the housing market in 2025, it is quite common to wonder and, in fact, ask yourself how such changes may affect your future goals in real estate, especially if you are considering buying or selling a house in San Diego or anywhere else. To get the most accurate answers to these questions, one should turn to experts for the best real estate advice. They draw on their experience and knowledge, backed by numbers and facts, to provide clear, actionable advice for their clients.

Real estate market analysts are always on the go. They are monitoring the market movements regularly to help with real-time predictions and to assist you and other consumers further. As for 2025, there are two major variables that are likely to influence the market for residential real estate, and these two are mortgage interest rates as well as the prices of homes. Here is a quick breakdown of where these key factors currently are and what this might mean for you.

Will Mortgage Rates Drop This Year?

Many people hold high expectations for interest rates, hoping they’ll drop significantly to the low levels seen in the past. The real question, however, remains unanswered: how low will they actually go, and how quickly might they rise again? There is some good news on the horizon, which is the fact that the experts are predicting that the rates will fall somewhat in the housing market in 2025. Still, it is important to be careful with these forecasts and expectations because those 3-4% rates we had in the past are not likely to come back in the near future. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR) mentioned:

 “Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%.”

Other industry experts have also pointed out that the rates might be steady in the mid-to-low 6% region as the year unfolds. Forecasts rely on the current situation, but factors like inflation and overall economic trends can still influence the future direction of rates.

That being said, don’t expect home prices to remain constant, and avoid trying to predict the perfect time to buy or sell. Rather, pay attention to the general direction and try to go from there. Working with a trusted lender and a real estate agent in your area will allow you to be more up-to-date with the rate changes and further help you decide on how it will affect your financial plan in the long run. Even a one percent change in the interest rates can make a huge difference to your monthly payments on your mortgage, especially if you are buying a home in San Diego.

Will Home Prices Drop This Year?

The quick answer is no, they likely won’t. Mortgage rates are expected to decrease gradually, bringing some relief to the masses, while home prices continue to rise at a slower, more sustainable pace. On average, expert forecasts suggest home prices will rise about 3% in the coming year, with most predictions landing in the 3-4% range. This represents a return to a more sustainable growth rate compared to the rapid price spikes we’ve seen recently.

So, if you’re waiting for a dramatic price drop before buying in the housing market in 2025, it’s important to set realistic expectations. While a significant price cut isn’t on the horizon, the slower pace of growth is good news for buyers. It means you won’t face the steep increases of past years, and any home you purchase is still likely to appreciate in value over time. That’s a smart investment for your future.

You might be wondering why prices are still rising. The answer lies in the basic principles of supply and demand. Even with more homes for sale compared to a year ago, inventory remains too low to meet buyer demand. As Redfin puts it:

“Prices will rise at a pace similar to that of the second half of 2024 because we don’t expect there to be enough new inventory to meet demand.”

Of course, the housing market varies widely from one area to another. While most markets will see prices continue to rise, some areas might experience a plateau or even slight declines if inventory grows enough to balance out demand.

To understand what’s happening in your specific neighborhood, it’s essential to connect with a real estate professional. An experienced agent can provide insights into local trends and help you make informed decisions about buying or selling in today’s market.