If high interest rates and high prices kept you out of the real estate market in 2024, are you wondering where the market is heading in 2025? Take a look back at last year’s real estate investment trends to gain some insight into what might lie ahead.
Recent economic conditions, advances in technology, demographic shifts and changing lifestyle preferences have spurred investors to adapt their approaches. To develop and hone your real estate investment strategies, review these trends from 2024.
Overview of the Real Estate Investment Industry
More than two-thirds of global wealth is held in real estate and global real estate investing was expected to rise 7% to $747 billion in 2024. But in that year, residential and commercial real estate faced challenges: High interest rates and rising home prices kept potential homebuyers on the sidelines and office vacancies rose as workers continued to favor remote work.
In November, estimated existing home sales in the United States for 2024 rose to 4.15 million, the fastest pace since March 2024 and a marked improvement from 2023 sales of 4.09 million, the lowest since 1995. While improved, home sales in 2024 still fell below numbers from 2008 (4.912 million), when the global economy crashed and the housing bubble burst.
Real estate performance was positive but lagging in 2024. Amid uncertainty, analysts and real estate watchers are cautiously optimistic about real estate investing in 2025. Economic growth is predicted to pick up as commercial real estate fundamentals could be poised for recovery, providing the potential for long-term returns for investors.
Top Real Estate Investment Trends for 2024
Several real estate investment trends in 2024 will shape the real estate market in 2025 and beyond.
1. Real Estate Prices Continue to Rise
Overall, real estate prices continued to rise through 2024, although at a slower pace than gains made after the COVID-19 pandemic. Homebuyers remain discouraged by high housing prices and mortgage rates; house purchase sentiment in December was 42% – lower than the 45% reported in November, though higher than the 31% in December 2023.
2. AI Transforms House Hunting
Artificial intelligence (AI) fully arrived in the real estate industry in 2024. New tools are reshaping the jobs of real estate agents while transforming the house-hunting process for buyers and the leasing experience for renters.
A few examples of AI technology in real estate include:
- Virtual assistants that schedule appointments and handle contacts for real estate agents
- AI tools that provide property valuations and analytics for market trends
- Lease abstraction tools that summarize leases
- Automated property management platforms that handle maintenance requests
Real estate investors would be wise to learn how to use emerging AI tools to their benefit.
3. Americans Prefer Suburbs Over Cities
In 2024, Americans continued to show a preference for leaving big-city life behind. The U.S. Census Bureau released a report in May 2024 that showed the fastest-growing locations in the U.S. were 30, 40 and 60 miles from the downtowns of the largest cities and metro areas – a reversal of trends in the 2010s.
The shift was driven by people looking to improve their quality of life, the popularity of remote and hybrid jobs, homebuyers seeking affordable homes with more space and younger people wanting to lay down roots and start families.
4. No Respite in Mortgage Rates
The average rate at the end of December 2024 was 6.42% for a 30-year mortgage. That was down slightly from November, but mortgage rates had been trending up in the second half of 2024 despite interest rate cuts by the Federal Reserve in the last two quarters and the consumer price index coming in at 2.7% in November 2024.
The December 2024 number was down from 7.03% the year before.
5. Rental Property Market Grows
The increase in remote work and the trend toward renting instead of buying among millennials and Gen-Zers has created competition for rental properties from urban cores to the suburbs. With limited housing options, young renters are staying put, contributing further to challenges with availability and affordability.
Miami remained the most competitive market in 2024, followed by Chicago and Milwaukee, which saw young and remote workers flocking to the suburbs. The fastest-growing rental market was Louisville, Kentucky, followed by the Triad in North Carolina, a 12-county area around the cities of Greensboro, Winston-Salem and High Point.
6. Demand for Sustainable Real Estate Increases
Investors are recognizing the increased value in properties built with environmental sustainability in mind, including buildings designed for energy efficiency and water conservation and those built with sustainable materials.
Sustainable properties are commanding higher premiums and tenants in these properties are staying longer. Some market watchers note consumer preferences, cost savings and regulatory pressures as factors driving this demand.
7. Popularity of The Sun Belt Area Continues to Rise
Once white-hot, the Sun Belt region continued to see population growth in early 2024 as people sought economic opportunities, lower taxes and warmer weather.
However, the pace of growth in the Sun Belt, which stretches across the southern United States, slowed and reversed in some cases as the year went on. Housing prices followed as the housing supply outpaced demand. Still, Florida remains the fastest-growing state.
8. Crowdfunding Revolutionizes Real Estate Finance
Online crowdfunding in real estate grew in popularity in 2024. Real estate crowdfunding gives individuals access to opportunities they might not have on their own, as several investors pool their money to finance real estate projects.
Crowdfunding can diversify your investments, allow you entry into the real estate market with less capital and provide passive income. However, your returns may be lower than an individual investment might offer. It could be hard to sell your share when you want to get out and you will have little control over the investment.
What Do These Real Estate Investment Trends Mean for 2025?
Most market watchers and analysts agree about uncertainty in the real estate market in 2025. However, a review of 2024 trends can offer some guidance on where to begin with real estate investing in 2025.
Frequently Asked Questions
Is it a good time to invest in real estate right now?
While uncertainty persists, real estate presents opportunities for investors in established and emerging markets. As economic conditions shift, work trends change and new lifestyle priorities develop, real estate remains a way for you to diversify your portfolio, whether you’re looking for longer-term appreciation or shorter-term rental income.
What is the next big thing in real estate?
The continued emergence of advanced technology – digital innovation, proptech software and web tools – is the next big thing in real estate.
Artificial intelligence, machine learning, blockchain technology, virtual reality and augmented reality, the Internet of Things, Big Data and more are streamlining many real estate processes, including property management, transactions and market analysis.
What is the outlook for real estate investment?
The U.S. economy is expected to continue to grow in 2025 and that growth, coupled with improving supply-and-demand dynamics and potentially lower financing costs, is predicted to drive a moderate recovery in real estate investment.