Volatile Mortgage Rates, Flat Rents And Climate Risks: What To Expect From Housing In 2025 According To Economists

The U.S. housing market is set to enter 2025, facing the same crosswinds as this year. Mortgage rates are expected to remain volatile and home prices are expected to continue their upward trajectory, albeit at a slower pace than during the pandemic boom years.

Recent data points to a market in limbo, with October’s median single-family home price reaching $437,300, up from $426,800 in September, according to U.S. Census figures. Meanwhile, the rental market has shown signs of cooling, with median rents hovering at $1,619 in October – practically unchanged from the previous year, according to Redfin.

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“If the housing market were going to crash, it would have already crashed by now,” Daryl Fairweather, chief economist at Redfin, said to CNBC. “The housing market has been so resilient to interest rates going up as high as they have.”

Economists project home prices will rise about 4% throughout 2025, marking a return to pre-pandemic growth rates. However, CoreLogic economist Selma Hepp told CNBC that price appreciation might remain flat during the spring buying season.

The rental landscape appears poised for shifts. A surge in new apartment construction is expected to keep national rent growth flat throughout 2025, potentially strengthening renters’ negotiating position. 

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Some property managers offer concessions like free parking or waived fees to attract tenants.

Mortgage rates will likely remain a wild card. While Redfin forecasts an average of 6.8% in 2025, the trajectory could shift based on economic policies and inflation trends. Jessica Lautz, deputy chief economist at the National Association of Realtors, expects rates to settle in the 6% range as 2025 unfolds.

Home sales volume might finally see an uptick after years of constraint. According to the CNBC report, Redfin projects approximately four million homes will change hands in 2025, representing a 2% to 9% increase from 2024. “People have waited long enough,” Fairweather said, pointing to pent-up demand from buyers and sellers who’ve delayed moves.

Climate considerations increasingly factor into housing market dynamics. Areas facing elevated risks from hurricanes, wildfires or flooding may see dampened price growth. Insurance challenges in these regions compound the issue, with some markets experiencing limited policy availability and steep premium increases.

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The impact extends beyond traditional high-risk zones. “Every part of the country is vulnerable because the weather patterns are changing,” Fairweather said. She points to California’s atmospheric rivers causing flooding in areas where homes weren’t built to withstand those conditions.

There are variations at the local market levels. In Austin, Texas, where multifamily construction has increased supply, rents dropped 2.9% year-over-year. Conversely, supply-constrained markets like Seattle, Washington D.C. and New York City continue experiencing annual rent growth of around 5%.

For potential homebuyers, affordability hurdles persist beyond purchase prices. Rising insurance costs and property taxes may temper market competition even as more buyers enter. “We’ll definitely see more buyers out there,” Hepp said, “but I don’t see the competition heating up to the levels that it has over the last few years.”

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