2025 Outlook: A Year of Stabilization and Opportunities

By: National Associations of Realtors (NAR)

In 2025, the housing market is expected to stabilize, providing more opportunities for homebuyers. The Federal Reserve is anticipated to take a gradual approach to easing monetary policy, with borrowing costs stabilizing. Although mortgage rates won't return to the extremely low levels seen during the pandemic, rates should hover around 6%, which will make homeownership more accessible for some buyers.

As mortgage rates fall below 6.5%, more buyers will re-enter the market, with 6.2 million households potentially able to afford median-priced homes. However, affordability will still be a challenge, especially in high-demand areas. Housing inventory is gradually increasing due to a combination of new construction and more homeowners listing their properties, but the overall supply will still fall short of pre-pandemic levels.

Home prices will continue to rise in 2025, but at a slower pace, around 2%, with housing starts likely reaching 1.5 million units in the next couple of years. Despite these positive signs, a housing shortage will remain a key issue for buyers.

Housing Hotspots for 2025: Top Markets Amid Stabilizing Rates

While real estate is inherently local, each year the National Association of REALTORS® identifies markets expected to outperform based on key trends and metrics. While every year presents unique circumstances, the following 10 economic, demographic and housing factors are anticipated to be influential in shaping local housing markets as mortgage rates will stabilize in 2025:

1. Fewer locked-in homeowners than the national level.

Why it matters: Homeowners with low mortgage rates from previous years hesitate to sell and take on higher mortgage rates, creating a “lock-in effect” that reduces housing inventory and activity in the market. Areas with fewer locked-in homeowners are likely to see more properties listed, increasing inventory and offering more opportunities for buyers.

2. Lower average mortgage rates than the national level

Why it matters: While mortgage rates differ by area, a lower mortgage rate enables more buyers to qualify for a mortgage, boosting housing demand. This can lead to increased home sales and market activity in the area, as lower rates reduce the financial burden of purchasing a home. If borrowers in an area can secure a lower mortgage rate, this could help more buyers to be able to qualify for a mortgage with smaller payments.

3. Faster job growth than the national level

Why it matters: Job growth drives economic stability and income increases, which are key factors for home affordability. Areas with faster job growth allow more people to set their sights into homeownership, further stimulating housing demand.

4. More Millennial renters who can afford to buy a home than the national level

Why it matters: Millennials represent a significant portion of first-time homebuyers. Areas where more Millennials can afford homes are likely to see increased demand, especially for entry-level and starter homes, boosting local activity.

5. Higher net migration to population ratio than the average level

Why it matters: Areas experiencing a strong influx of people also see increased demand for housing, as new residents require accommodations. This usually boosts activity in the area while also making home prices increase faster if supply doesn’t keep pace with demand.

6. More households reaching homebuying age in the next 5 years than the national level

Why it matters: Households in the 35-40 age group are a key demographic for homeownership. According to NAR’s 2024 Profile of Home Buyers & Sellers, the typical first-time buyer is 38 years old. Areas with a larger share of households entering this age bracket can expect stronger long-term demand for homes, affecting new construction and market stability.

7. More movers who purchase homes than the national level

Why it matters: A higher share of movers choosing to purchase homes indicates long-term growth and stability for the local housing market. While an influx of newcomers generally stimulates economic activity and boosts the housing market, those who choose to buy can bring even greater long-term benefits for the area. Their decision to invest in homeownership suggests people are there to stay, fostering a more stable and prosperous local market over time.

8. More homeowners surpassing the average length of tenure than the national level

Why it matters: Homeowners who have surpassed the average tenure (typically 16 years) are more likely to consider selling, increasing housing inventory. Areas with a larger share of these homeowners may see an uptick in listings, helping to ease supply constraints.

9. More inventory of starter-homes than the national level

Why it matters: Starter homes, typically priced at 85% of the median-priced home, are critical for first-time buyers. Areas with more starter-home inventory provide greater accessibility for younger or lower-income buyers, driving demand and creating a more affordable housing market.

10. Faster home price appreciation than the national level

Why it matters: Faster price appreciation reflects a strong local housing market with increased demand, generating wealth for homeowners, attracting investment, and providing resources for community developments.