Redfin outlines the major forces shaping next year's housing market
Redfin’s economists have released their top predictions for the 2025 housing market, forecasting continued high mortgage rates, modest home price growth, and a shifting landscape for renters, buyers, and builders.
Redfin predicted home prices will rise by 4% in 2025, fueled by persistent inventory shortages. The growth will be steady but modest, leaving many potential buyers priced out of the market. This could shift more Americans toward renting, as rising prices make homeownership increasingly elusive.
Mortgage rates will likely hover around 6.8% throughout 2025, continuing to weigh on affordability. This projection is tied to anticipated limited Federal Reserve rate cuts, potential inflationary pressure from tariffs, and US deficit concerns. However, rates could dip to the low 6% range if economic conditions weaken or policy changes are scaled back.
Redfin forecasted existing home sales to rise by 2% to 9% year-over-year, reaching an annualized rate of 4.1 to 4.4 million. Despite high costs, pent-up demand could boost sales, particularly if mortgage rates drop unexpectedly. A strong economy and renewed buyer confidence following the election may also drive demand.
“Even before the election, Redfin’s data showed that rising mortgage rates didn’t deter buyers as much as expected, likely in part because many Americans have grown accustomed to high mortgage rates,” Redfin said in the report. “If the economy stays strong and enough people can afford next year’s high housing costs, that would push up sales.”
Redfin anticipates a renter-friendly market in 2025, with flat median asking rents and improved affordability due to rising wages. New rental units, initiated during the pandemic-era construction boom, will also hit the market, giving renters more options and bargaining power. Landlords may offer concessions such as rent-free months or upgraded amenities to attract tenants.
Easing regulations under the new administration could boost single-family and multifamily housing starts in 2025, though benefits may take years to materialize. However, challenges such as high interest rates and labor shortages—compounded by stricter immigration policies—could temper growth.
Real estate commissions, particularly on luxury homes, are expected to drop slightly in 2025. New National Association of Realtors (NAR) rules are pushing fee negotiations, with competitive markets driving further reductions.
Mergers and acquisitions among real estate firms, lenders, and title companies are likely to increase under a more merger-friendly Federal Trade Commission. This consolidation could reshape the industry as companies look to streamline services and boost profitability.
The effects of climate change will become more pronounced in housing markets, especially in high-risk areas like coastal Florida and wildfire-prone California. Prices in climate-safe regions like the Midwest and Northeast may rise as buyers prioritize safety and affordability.
Read next: How the reputation of US mortgage brokers has transformed for the better
Pro-business policies in blue cities like San Francisco and Portland could draw residents back to urban centers. Improved housing supply and declining price growth in cities like Los Angeles may also encourage more people to stay in or return to metropolitan areas.
Younger Americans are increasingly delaying homeownership, with many choosing to rent or live with family into their 30s. Redfin anticipates older buyers will dominate the affordable housing market, leaving younger generations to explore alternative wealth-building strategies.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
