Nobody has a crystal ball, but here are some thoughts as we enter 2025. I am thinking we will see interest rates fall to around 6.5 percent in 2025, but not in a linear fashion. Last year factors such as election uncertainty, higher Treasury debt issuance and market volatility, helped push mortgage rates back up by almost one full point. Having said that the big picture hasn’t changed that much in 2025. We are still in the cooldown phase of an economic cycle, with decelerating inflation, and the Fed cutting short-term rates. Still, if we’ve learned one thing in the past two years, it’s that interest rates never get to where they’re going in a straight line.
Existing home sales have definitely bottomed out and should pick up by as much as 10 percent year over year in 2025. Sales volume was held back by the low inventory of homes on the market in 2022 and 2023, but we saw an uptick of sellers in 2024, and buyer activity really started picking back up as well in the fall. Whether you are a buyer or seller there seems to be less uncertainty now and people are getting more comfortable
In general home prices will not fall in 2025, but they’ll only rise by around 2 percent to 4 percent. The past three years have seen a roller coaster of gains and slowdowns when it comes to home prices, thanks to the fluctuation in interest rates and the changing supply of available homes for sale.Now that inventory is back to a more balanced level, 2025 should see a more consistent market, causing prices to stabilize, and the comfort level with the new normal range for interest rates will help thaw the market.
More parents helping with down payments will become more common and more important than ever in 2025. That’s because the high price of homes today means that homeownership is out of reach for many younger home buyers. However, those same high prices also mean that the baby boomer generation has a lot of home equity. So, as they discuss homeownership with their adult children, many parents see a down payment gift as one of the most meaningful ways to help them achieve home ownership. Transfers of generational wealth in general will contribute to a more robust real estate market.