Homebuyers should brace for another year of elevated mortgage rates, with Realtor.com forecasting an average of 6.3% next year. While down from 2024’s projected 6.7% average, rates will remain well above the 4% historical average from 2013 to 2019.
The silver lining is the expanding housing inventory, which Realtor.com projects to grow by 11.7% in 2025, according to the report. New construction will add to supply, with housing starts expected to jump 13.8% to 1.1 million units.
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After years of tight inventory, the improvements could create more breathing room for buyers.
“This past year brought us a surprising upward trend in home price growth despite the persistence of high mortgage rates and rising inventory,” Realtor.com’s economists noted in their forecast. Home prices are expected to climb an additional 3.7% in 2025, following 2024’s projected 4% increase.
According to the forecast, the brief dip in mortgage rates to near 6% in September likely won’t return. “There will be volatility around this average, so shoppers may catch a lucky break, but our advice is to plan and budget for the mid-6% range.”
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Some markets already show signs of shifting power dynamics. About 20% of listings nationwide had price reductions, with Midwestern cities leading the trend. Cincinnati, Indianapolis and several markets across Ohio, Indiana and Illinois top the list for price cuts, led by Urbana, Ohio, where 71% of listings saw reductions.
Sales volume should tick up modestly, with existing home sales projected at 4.07 million – a 1.5% gain from this year but still well below the 2013-2019 average of 5.28 million. The report said that affordability challenges remain, though wage growth and tax adjustments could offer some relief.
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For renters, 2025 might bring slight relief. The Realtor.com forecast projects a 0.1% decrease in asking rents, continuing 2024’s 0.2% decline. New multifamily construction should boost supply, particularly in the South, where rental stock is expected to grow 1.5% annually – the highest regional rate nationwide.
“While the rental vacancy rate is at its highest level since the start of the pandemic, it remains somewhat below the 7.2% average seen from 2013 to 2019,” the report said, suggesting continued normalization of the rental market throughout the next year.
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