Redfin’s 2025 housing predictions involve more home sales in 2025, driven primarily by pent-up demand. However, some potential homebuyers will still be priced out as home prices continue to rise and mortgage rates remain near 7%. In contrast, rental prices are expected to stay flat while wages increase, improving affordability for renters. Politicians from both parties have committed to lowering housing costs for working-class Americans and increasing home construction, providing Redfin economists a positive outlook that these goals will be realized over the next several years.

Home Sales To Modestly Improve

Redfin projects existing home sales to increase slightly in 2025, with an annualized rate expected to fall between 4.1 million and 4.4 million, representing a year-over-year rise of 2% to 9%. This unusually broad sales range reflects uncertainty in the market: while high housing costs may deter some buyers, there is also significant pent-up demand.

A modest sales increase would likely result from elevated mortgage rates and limited inventory, as many homeowners remain reluctant to sell.

On the other hand, sales could see a larger boost if mortgage rates drop more than anticipated or if the recent surge in homebuying demand persists. After the November election, homebuying demand spiked even with mortgage rates hovering around 7%. This was partly due to buyers waiting for post-election uncertainty to clear before making major purchases and partly because a Republican-led administration instilled greater financial confidence in many people.

Even before the election, Redfin’s data indicated that rising mortgage rates didn’t discourage buyers as much as expected, possibly because Americans have adapted to higher rates. If the economy remains strong and enough buyers can handle next year’s elevated housing costs, sales could climb further.

Mortgage Rates To Remain Near 7%

Mortgage rates are expected to remain in the high-6% range throughout 2025, with the weekly average fluctuating but settling around 6.8%. Investors anticipate that if President-elect Donald Trump enacts key components of his proposed tax cuts and tariffs while maintaining a strong economy, the Federal Reserve will likely cut its policy rate only twice in 2025, keeping mortgage rates elevated. Tariffs could drive inflation, and additional tax cuts would increase the U.S. deficit—both factors that would push rates higher. High mortgage rates will remain a significant barrier to home affordability.

However, rates could fall to the low-6% range if the economy weakens or if plans for tariffs and tax cuts are scaled back. The unpredictability of a new presidential administration, particularly this one, adds to the uncertainty surrounding the mortgage market.

Rich Sellers And Homebuyers Get Richer

Wealthy people will pay less to buy and sell homes in 2025 as real estate commissions decline slightly. In the first full year under the new National Association of Realtors (NAR) commission rules, Redfin expects real estate commissions to come down slightly. That’s true especially for luxury homes where agents have the most room to reduce their fees, and in competitive housing markets, where fees are increasingly a point of negotiation in a bidding war. It remains to be seen how much antitrust enforcers in the incoming administration will press additional real-estate industry reforms. The Department of Justice said in a recent filing that it “continues to scrutinize policies and practices in the residential real estate industry that may stifle competition,” but it’s unclear if it will take any formal action.

Fewer Construction Regulations

Redfin forecasts that homebuilders will increase single-family construction in 2025, though it may take several years for this growth to significantly lower homebuying costs. Builder confidence has risen following the Republican sweep of the White House, Senate, and House, fueled by optimism that regulatory hurdles may ease. Additionally, builders are expected to benefit from the mortgage-rate lock-in effect, which limits competition from existing homes on the market.

Easing regulations are also anticipated to spur a rebound in multifamily housing starts, reversing the trend from 2024 when builders scaled back apartment projects due to an oversupply.

However, builders face a few challenges. Interest rates are likely to remain elevated, and the new administration’s plans to reduce immigration could dampen residential construction, as immigrants currently make up roughly 30% of the nation’s construction workforce.

Home Prices Will Rise 4%

The median U.S. home-sale price is forecasted to increase steadily in 2025, finishing the year 4% higher than in 2024. This growth rate is expected to mirror the pace seen in the latter half of 2024, driven by insufficient new inventory to meet demand. Rising home prices will continue to make homeownership unattainable for many Americans, prompting some potential buyers to turn to renting instead.

A Renter’s Market

A lackluster housing market could mean that many Americans will continue to rent or transition to renting. While the cost of homeownership is set to rise, rental affordability is expected to improve. Redfin forecasts that the median U.S. asking rent will remain flat year-over-year in 2025, making rent payments more manageable for the average American as wages increase.

Additionally, new rental units will enter the market as projects initiated during the pandemic apartment-building boom are completed. This increase in supply is expected to outpace demand, prompting landlords to offer incentives such as free parking, a free month of rent, enhanced amenities, or pauses on rent hikes to attract and retain tenants.

Industry Consolidation

The new administration is expected to make the Federal Trade Commission (FTC) more open to approving mergers and acquisitions among large companies. Historically, the U.S. real estate industry has been highly fragmented, with numerous search sites and brokerages of various sizes and business models competing for both agents and customers. While many larger brokerages already offer affiliated mortgage or title services, 2025 is likely to bring an increase in consolidations among brokerages, lenders, and title companies aiming to maximize business from each customer.

Pricing Climate Risks Into Homes

The threat of natural disasters is expected to begin lowering home prices or slowing price growth in high-risk areas such as coastal Florida, wildfire-prone regions of California, and hurricane-prone parts of Texas. As a result, homebuyers and their agents will increasingly educate themselves about the specific risks associated with individual properties.

More buyers are likely to relocate to comparatively affordable areas in the Midwest and Northeast, which offer greater protection from climate-driven disasters.

Hurricane Helene and Hurricane Milton marked a turning point for many middle- and lower-income homeowners in Florida. This fall, more buyers sought to leave Florida compared to a year ago, while fewer out-of-town buyers showed interest in moving to the state. Coastal Florida may increasingly become a haven for wealthy individuals who can afford sky-high insurance premiums or rebuild homes with cash. Despite these challenges, Redfin predicts that the coastal Florida luxury market will remain strong.