Redfin’s 2025 Housing Market Predictions (Home Prices, Mortgage Rates, & More)

Dave:
It’s prediction season. As we wind down 2024, nearly everybody is occurring file about what they suppose will occur to the actual property market in 2025. Redfin is without doubt one of the most dependable sources round for actual property business information. So as we speak I’m going to evaluate their predictions that their economics group put collectively for 2025. They’ve put collectively a complete of 10 predictions and I’ll inform you I undoubtedly don’t agree with all of them, so make certain to stay round to see the place we differ in opinion. And if you wish to see all of my private predictions for actual property in 2025, you may take a look at our YouTube channel or possibly you’re watching there already, however should you’re listening to this as a podcast, we just lately launched movies about the place I see mortgage charges, house costs and rents trending within the subsequent 12 months. So you may go verify these out.

Dave:
Alright, onto Redfin’s prediction primary. First prediction from Redfin concerning the housing market in 2025 reads, house costs will rise 4% in 2025. I’ll simply learn you all a few traces that specify a few of their logic right here after which I’ll offer you my response to it. Redfin writes, we anticipate the median US house sale worth to rise steadily all through 2025, ending the 12 months 4% larger than it was in 2024. Costs will rise at a tempo much like that of the second half of 2024 as a result of we don’t anticipate there to be sufficient new stock to satisfy demand. Rising costs are one issue that can hold house possession out of attain for a lot of Individuals main some can be house consumers to hire as an alternative. So Redfin thinks that costs will develop 4%. I feel this can be a fairly practical prediction. I’ve checked out most likely, I don’t know, 10, 12, possibly 15 completely different predictions.

Dave:
That is from large firms that you just’ve most likely heard of like Redfin or Zillow or extra specialty boutique outlets, lenders who all make these kinds of predictions and the consensus appears to be that house costs will rise someplace between two to five% subsequent 12 months. In nominal phrases, I’ve made a few of my very own predictions for the next 12 months and I truly got here out possibly simply barely decrease than this, three, three and a half %, however at that time you’re type of splitting hairs. So I usually agree with this, however let’s simply speak about why. And it seems like loads of different forecasters suppose that we’re going to see fairly secure home progress, like 4% or anyplace actually across the tempo of inflation is what is taken into account regular appreciation or worth progress within the housing market. And so let’s simply discuss a little bit bit about why we expect that the majority of us no less than suppose that costs are going to go up a little bit bit.

Dave:
The very first thing to me is simply pattern, proper? We have now seen house costs going up for the final a number of years. After all, previous outcomes aren’t indicative of future outcomes, however for the final a number of years, even excessive rates of interest, we’ve got seen demand outpace provide. Lots of people thought the housing market was going to crash in 2022 when charges went up. It didn’t. Individuals thought that they might crash in 2023 or no less than come down a little bit bit. They didn’t, no less than on a nationwide degree. Positively some markets that did similar factor in 2024 individuals mentioned it’s going to decelerate, they’re going to go adverse. Certain there are locations in Texas or Louisiana which are adverse, however on a nationwide degree we’re nonetheless up about 4%. Some individuals even say 5% 12 months over 12 months and that’s above common progress. The long-term common is like 3.4%.

Dave:
So I feel this concept that the housing market goes to crash or that costs are going to come back down as a result of demand goes to evaporate, I simply don’t suppose that’s true. It hasn’t occurred. We’ve seen the worst of mortgage charges enhance and it hasn’t brought on a crash but, and there’s loads of motive to imagine that within the coming 12 months in 2025 that there’s truly going to be extra demand In simply the final couple of weeks because the presidential election, there are a few measurements of demand which have began to tick up and present some extra life within the housing market. One comes from Redfin, the corporate we’re speaking about as we speak, however they’ve their very own measurement of demand. It’s like a house purchaser index and principally it simply tracks how many individuals on their web site request excursions and are wanting round their web site and so they monitor this and been doing it for years and it has gone up considerably because the election 17% month over month and it’s truly on the highest level it has been at since September of 2023.

Dave:
So there’s an indication that demand is definitely going up for homes, however in fact we will’t speak about demand with out speaking about provide and we’ve got to consider whether or not provide goes to come back again proportionally and we’re seeing new listings tick up, however just a bit bit with rates of interest forecast to most likely go down and due to another tendencies, it does seem to be we’re additionally going to see some extra provide subsequent 12 months. However my expectation, and it type of looks like that is what Redfin is getting at as nicely, is that each demand and provide are going to come back again at a comparatively equal tempo. And if this occurs, then worth progress will keep most likely fairly much like the place it’s this 12 months. And in order that’s why Redfin and I feel loads of different forecasters are predicting that we’ll see related progress charges in 2025 to what we noticed right here in 2024.

Dave:
I feel it is perhaps a little bit bit decrease on a nationwide degree, however I’m principally simply splitting hairs. So total I agree with Redfin on this one. Redfin’s second prediction for 2025 reads mortgage charges will stay close to 7%. Mortgage charges are more likely to stay within the excessive sixes vary all through 2025 with the weekly common charge fluctuating all year long, however averaging round 6.8%. Buyers are anticipating that if president-elect Donald Trump implements a good portion of his tax cuts and tariffs and the financial system stays sturdy, the Fed will solely lower its coverage charge twice in 2025. Retaining mortgage charges excessive tariffs may very well be inflationary and enacting extra tax cuts would enhance the US deficit, each of which might push mortgage charges up. Excessive mortgage charges are the second a part of the equation that can hold house shopping for unaffordable. Okay, there’s so much to dig into with this one, however mortgage charges remaining close to 7%.

Dave:
I don’t essentially agree with this. I do agree with the sentiment that charges are going to remain larger than most individuals suppose. In the event you go on social media or should you take a look at loads of forecasters, persons are saying that charges are going to get into the fives. I’ve heard individuals say that they’re going to get into the fours and personally I don’t imagine any of that. I feel that charges are going to remain someplace within the sixes subsequent 12 months. I do suppose there’ll be a little bit bit decrease than Redfin is predicting. So let me simply clarify briefly why I feel charges are going to remain a little bit bit larger. All of it comes all the way down to bond yields and I do know that is boring should you’ve heard me speak about this, however simply give me one minute and I’ll attempt my greatest to clarify this to you.

Dave:
Mortgage charges aren’t managed by the Fed. They’re actually influenced by bond traders and bond traders don’t actually suppose like actual property traders or like inventory traders. They’re majorly involved with issues like inflation and recession danger. And sometimes when inflation is on their thoughts, in the event that they’re frightened about inflation, meaning bond yields go up and that pushes mortgage charges up when as an alternative of inflation, traders are frightened concerning the different aspect of the equation, which is a recession. They often pour cash into bonds that pushes yields down and take mortgage charges down as nicely. And so the explanation I’m saying that I feel that bond yields are going to remain up is as a result of no less than the market is telling us proper now that bond traders are extra afraid of inflation within the coming years than they’re of a recession. The financial system by most conventional metrics has regarded okay over the past 12 months and Trump has promised to implement loads of stimulative insurance policies that are more likely to enhance the financial system.

Dave:
When an financial system will get boosted an excessive amount of, there’s worry of inflation and in order that’s doubtless what we’re seeing proper now with charges staying excessive. That’s why mortgage charges, even because the Fed charge lower in September have elevated. All of that is to say I feel we are going to see a powerful financial system subsequent 12 months and meaning mortgage charges will doubtless keep larger, however I do suppose we’re form of on this hopefully lengthy downward pattern for mortgage charges. Once I say lengthy downward pattern, I feel it’s going to take greater than a 12 months for them to form of settle into the brand new regular. And I’m hopeful, I don’t know, this isn’t a prediction, however I’m hopeful that the brand new regular shall be someplace round 5 and a half % that’s near the long-term common. It form of is sensible given what the Fed has mentioned they’re going to do.

Dave:
That’s form of what I’m pondering, however I don’t suppose that’s going to occur in 2025. Personally, I feel it’s extra doubtless that that occurs in 2026, possibly even to 2027. It’s simply not going to maneuver as rapidly as issues have within the final couple of months. And that’s why I feel traders, everybody listening to that is higher off planning for the next rate of interest atmosphere and making funding choices primarily based on that. And if I’m incorrect and charges go down extra, nice, that signifies that you’re going to have much more tailwinds to help your investing. However being cautious and presuming that charges are going to remain a little bit bit larger will aid you be a little bit bit extra conservative and shield your self in opposition to any draw back danger. So up to now we’ve talked about redfin’s predictions about house costs and mortgage charges. Subsequent we’re going to speak concerning the course of house gross sales quantity in 2025 proper after the break.

Dave:
Hey everybody, welcome again to the present. At present we’re reviewing redfin’s 2025 predictions for the housing market and we’re on to prediction quantity three, which reads, there shall be extra house gross sales in 2025 than 2024. Gosh, I hope that is proper and I feel it’s. We have now been in, some individuals have been calling it a housing recession or a stoop or a slowdown or the market is caught, no matter. The very fact is that there simply aren’t that many houses being bought proper now in comparison with historic norms for 2024. The 12 months’s not over but, however we’ve got a excessive diploma of confidence that the variety of houses that shall be bought this 12 months shall be lower than 4 million and 4 million remains to be so much, proper? We have now to be trustworthy {that a} slowdown is just not that loopy as a result of there’s nonetheless 4 million, but it surely’s a very large distinction in comparison with the long-term common, which is about 5 and 1 / 4 million.

Dave:
So it’s like 2020 5% down from the long-term common and it’s also down greater than 50% from the height in 2021 when it was promoting an annualized charge of 6.7 million. So that’s actually loopy as a result of it’s down from the long-term common, however if you evaluate the place we’re as we speak to the place we had been simply three years in the past, the delta, the change has been simply monumental. And so having house gross sales begin to choose up can be an excellent factor and I do suppose that’s going to occur. Why I feel house gross sales are going to extend is predicated on what I used to be saying earlier, we talked a little bit bit within the first part. We had been speaking about house costs, about provide and demand, and I informed you that I feel that demand goes to come back again. I don’t know the way aggressively, however I do suppose there shall be a rise in demand in 2025 and I additionally suppose there shall be a rise in provide and simply reverting again to econ 1 0 1, should you take a look at provide and demand, if each issues go up, if provide goes up and demand goes up, quantity goes up, amount goes up.

Dave:
And so there’s I feel a very good case to be made that there’s going to be extra house gross sales in 2025 than 2024. So I completely agree with this one. That mentioned, earlier than we transfer on, I simply need to caveat this and say that it’s most likely going to be a small enhance. We’re most likely speaking, Redfin says they suppose that it’s going to go as much as 4.1 million to 4.4 million, in order that’s possibly a two, three, 4% enhance, possibly a little bit bit larger than that, however that’s not going to revive house gross sales quantity to the long-term common, but it surely’s a step in the proper course. In the event you’re choosing up on the theme of what I feel goes to occur subsequent 12 months, it’s that issues are going to get higher, however simply marginally. So I don’t suppose we’re reverting again. We’re not going again to this era the place we’ve got large affordability, large house gross sales, large house worth appreciation.

Dave:
I feel it’s going to be a protracted, gradual and regular restoration for the housing market, however you bought to begin someplace, proper? We have now to hit a backside and begin turning round and I feel that that is the time that that’s going to occur. I feel 2024 goes to signify the low for house gross sales for us and as we go into 2025, we’re going to see a barely extra energetic market and hopefully that may simply construct on itself after 2025 within the out years in order that we restore a extra wholesome, strong and energetic market. Alright, nicely on to Redfin’s fourth prediction, which reads 2025 shall be a renter’s market. There are clarification reads, many Individuals will stay renters or turn out to be renters whereas the price of shopping for a house will enhance, rental affordability will enhance. We anticipate the median US asking hire to stay flat 12 months over 12 months in 2025, that can make hire funds extra inexpensive to the everyday American as a result of wages will rise.

Dave:
There may even be extra new leases coming in the marketplace with lots of the models builders began engaged on throughout the pandemic condo constructing, growth coming to fruition. It will create extra provide than demand. Motivating landlords who supply concessions like free parking a month of free hire, extra facilities or hiatus on hire will increase so as to retain residents. I couldn’t have written this one higher myself. I wholeheartedly agree with this prediction from Redfin. They’re principally saying that that is going to be a 12 months the place tenants and renters have extra of the ability in negotiating hire costs. This once more simply comes all the way down to a provide and demand query. We’ve coated this a bit on the present, however proper now we’re on this form of distinctive time within the housing market the place we’re seeing principally only a flood of latest flats coming on-line. It is because throughout 20 21, 20 22 issues had been nice for multifamily operators, rents had been going up, cap charges had been low, valuations had been skyrocketing, and builders wished to get in on that.

Dave:
And they also began constructing a ton of multifamily properties in loads of sizzling markets all through the south and the Sunbelt, you most likely know a bunch of this, however as a result of multifamily takes a number of years to finish, we’re solely simply now seeing all of these models from this constructing, growth, come on-line and hit the market. And the cool factor about multifamily investing is that each one the info is there. It’s very easy to forecast this and you could possibly principally see that by the primary half of 2025, that dynamic goes to proceed and this can damage hire progress, proper? That is once more, provide and demand. There’s simply going to be too many flats accessible for hire for the quantity of people that need to lease these flats. And that signifies that operators, landlords, property homeowners must compete for tenants. And the way do they compete for tenants?

Dave:
Properly, Redfin talked about it. It’s like stuff like a month of free hire, reducing rents, free parking, all issues which are going to decrease revenue, decrease income for traders and be helpful to tenants. And so once they say that they suppose 2025 shall be a renter’s market, I agree, it’s not like rents are happening. They’re truly comparatively flat on a nominal foundation proper now, and I don’t truly suppose that they’re going to go adverse in a nominal phrases subsequent 12 months. I simply suppose they’re going to most likely develop decrease than the tempo of inflation. And though that’s not one thing to panic about, if we’ve got adverse 1% actual returns, that’s hopefully not going to essentially change something for anybody. But it surely’s one thing to notice as a result of clearly as traders, your whole bills are going to go up, insurance coverage goes loopy, taxes are going up, labor supplies, all these various things are going up, however your rents are most likely not going to maintain tempo with that.

Dave:
Once more, this isn’t in each market, however on a nationwide scale that’s doubtless the dynamic that’s going to occur. That is form of a tangent as a result of we’re speaking about 2025 predictions right here, however I do need to simply point out that this pattern will finish. We all know that beginning in 2022, that constructing growth that I used to be simply speaking about, fully stopped, pendulum swung a method and we had a ton of constructing it, swung again all the best way the opposite means and we’ve got little or no constructing proper now. So meaning beginning most likely within the second half of 2025, we’re going to haven’t loads of flats coming on-line and we’d have the other scenario as a result of the fact, the long-term view of that is that the US doesn’t have sufficient housing models, proper? We’re someplace between one and seven million housing models wanting what we want.

Dave:
And so we want all of those flats, however they’re simply all coming on-line at the very same time. And that’s creating form of this inefficiency available in the market that’s benefiting renters and tenants proper now and hurting the owner aspect of issues. That may most likely even out within the subsequent couple of years as soon as all of this new provide will get absorbed, most likely near the top of 2025 or someplace round there. So simply to summarize this, I agree I wouldn’t depend on loads of hire will increase over the subsequent 12 months, however the long-term forecast for hire progress nonetheless stays constructive. In order that’s my tackle the hire forecast Arising after the break, I’m going to speak about how building regulation may change the market and I’ll do fast fireplace reactions to 5 extra predictions that Redfin put out. We’ll be proper again.

Dave:
Welcome again to our response present the place we’re discussing Redfin’s 2025 housing market predictions. The fifth prediction that we’re going to speak about proper now reads fewer building laws will result in extra house constructing. Their clarification says we anticipate house builders to assemble extra single household houses in 2025. They’ll take just a few years for the rise in house constructing to make shopping for a home considerably extra inexpensive. The Republican sweep of the White Home Senate and Home has improved builder confidence by bringing renewed optimism that regulatory burdens could ease. Builders may even financial institution on the truth that the mortgage charge lock-in impact will put a lid on the quantity of current stock competing with new builds. Easing laws must also result in a rebound in multifamily housing begins. That shall be a reversal from 2024 when builders pulled again on condo begins due to the glut of provide.

Dave:
Okay, so do I agree with this concept that fewer building laws will result in extra house constructing? That is type of a sure and no. I agree with the sentiment right here. What they mentioned is that fewer building laws is build up builder confidence. Issues are wanting proper for extra building. And I do suppose that’s true. I feel that’s going to offer some upward stress on building begins. Mainly that is going to present builders some extra confidence and may assist. However I additionally need to point out that there’s possibly going to be some counter stress. There may be another variables within the housing market and the broader financial system that may damper a few of this impact of deregulation and that’s principally tariffs. And we talked about that earlier and once more, we don’t know precisely what it’s going to do in the event that they’re going to occur, how extreme they’re going to be.

Dave:
So I’m simply need to throw out one scenario that would occur. But when Trump implements tariffs to the tune of 40%, he mentioned just lately 40% for China, 20% for Mexico, issues like that. Most economists imagine that if there are tariffs carried out, it’s going to create a one-time price enhance. It’ll be inflationary, however only for this one time when the tariffs are elevated, however these tariffs are more likely to are available in 25. So builders will really feel the affect of these tariffs within the subsequent 12 months. Now once more, I don’t know if that’s essentially going to occur. I simply need to present some context to this prediction that yeah, deregulation may and doubtless will enhance builder confidence, however there are another issues that we’ve got to attend and see to know whether or not or not there’s truly going to be a major enhance in building. I hope that is proper as a result of we do want extra housing provide in america.

Dave:
We simply talked about that and I feel we do must work on constructing our means out of this housing deficit that we’re in, however I simply need to mood individuals’s expectations and simply present some counter narrative right here. Alright, so these are our first 5 predictions. Once more, we talked about house costs, we talked about mortgage charges, house gross sales, that renters could have the higher hand of the subsequent 12 months and what’s going to occur with building with deregulation. Redfin has truly made 5 extra predictions and I’m simply going to fast fireplace a few these final ones as a result of we don’t have time for all of them and I feel I can reply them fairly rapidly. So prediction quantity six says, rich individuals can pay much less to purchase and promote houses as commissions decline barely. I truly agree with this. I do suppose there’s this downward pattern in commissions, however I don’t suppose it’s going to be as dramatic as lots of people suppose it’s going to take a while for all of this NAR fallout to work by the actual property market.

Dave:
And so it’s doubtless that commissions will pattern down, however I feel it’s not going to be that dramatic. Redfin is principally saying that rich individuals who have excessive worth listings or shopping for excessive worth houses will take pleasure in the good thing about decrease commissions most as a result of the commissions are going to be so large that ages are going to be extra keen to barter on these and that logic is sensible to me. So I purchase into this one. Prediction quantity seven is the actual property business will consolidate. They mentioned that underneath the brand new administration, the FTC shall be extra more likely to approve mergers and acquisitions among the many giant firms, in contrast to different industries with just a few dominant gamers, the US actual property business has lengthy been fragmented with a number of actual property search websites and brokerages, all of sizes enterprise fashions competing for brokers and clients. I agree with this.

Dave:
I don’t know if it’s coming this 12 months, but it surely does appear inevitable that actual property must consolidate. It’s actually fragmented. I agree with that. I don’t know if extra mergers and acquisitions is the factor that lastly supplies that catalyst, and I don’t know if it occurs in 2025, however I do suppose consolidation is probably going, no less than within the subsequent couple of years. Prediction quantity eight reads, local weather danger shall be priced into particular person houses, particularly in coastal Florida. The reason says the danger of pure disasters will begin pushing down house costs or slowing worth progress in local weather dangerous locations like coastal Florida, wildfire inclined elements of California and hurricane inclined elements of Texas. Total, I agree with this. I feel we’re already seeing this, so I don’t know if that is a lot of a ahead wanting factor, however we’re already beginning to see loads of these market seen house worth declines.

Dave:
And I don’t essentially suppose it’s as a result of individuals aren’t transferring there. Individuals are clearly transferring to Florida. Lots of people are transferring to Texas, however insurance coverage prices are so costly that it’s changing into unaffordable for the individuals who need to reside in these markets to reside there. And so one thing has to present, and I’m fairly certain insurance coverage firms aren’t going to present. And so that’s placing stress on house sellers to decrease costs. I feel we’re already seeing this. So I agree with this common prediction that this pattern goes to proceed. Prediction 9 Mayors in blue cities will assist reverse the flight from city facilities. This says San Francisco elected a pro-business democrat as its new mayor. This 12 months, Portland, Oregon elected a mayor who pledged to finish unsheltered homelessness and a number of other different large cities in blue states are enacting robust on crime insurance policies to revive their downtowns and retain residents.

Dave:
So I feel usually that is too broad of a prediction to both agree or disagree with saying mayors in blue cities will trigger this shift in demographic tendencies, I feel is a bit a lot maybe in some cities with sure mayors, with sure insurance policies that may occur. However we’re seeing loads of indicators that not simply in blue cities, that persons are transferring to the suburbs, persons are favoring extra suburban neighborhoods. And so I feel there’s an uphill battle right here in blue cities or pink cities to cease the flight from city facilities. And so I don’t know if that is going to occur in 2025. Final prediction quantity 10, gen Z will rewrite the American dream, chopping house possession from the script. This one is one thing I’m actually glad they talked about right here as a result of it’s one thing I’ve been fascinated by so much. Perhaps we’ll simply do a complete present on this sooner or later as a result of house possession has simply turn out to be so unaffordable.

Dave:
And should you imagine what Redfin wrote right here and a few of the issues that I agree with Redfin on, it’s that house possession and affordability is just not going to get that a lot simpler within the subsequent couple of years. It’d get a little bit simpler subsequent 12 months and hopefully we’ll form of snowball and get simpler and simpler over the subsequent couple of years, but it surely does really feel proper now unlikely that we’re going again to a degree of affordability that we noticed within the 2010s or throughout Covid, and that has large implications for our complete society. Truthfully, house possession is such an necessary a part of the American dream of what Individuals take into account success. What does it imply that fewer persons are doubtless to have the ability to afford houses? Is it, as Redfin mentioned that Gen Z goes to rewrite the American dream and possibly house possession is not a part of that dream?

Dave:
I don’t know precisely what this implies, however I feel it’s a very necessary matter and factor to consider as an actual property investing business. And we’ll most likely make a complete present about this matter of house possession within the close to future. So make certain to remain tuned for that. Alright, these are my reactions to Redfin’s 10 housing market predictions for 2025. I’m very curious to listen to should you agree with Redfin. In the event you agree with me, please make certain to let me know. In the event you’re watching in YouTube, make certain to let me know within the feedback under or simply shoot me a message on BiggerPockets or on Instagram and let me know what you suppose goes to occur right here in 2025. Thanks all a lot for listening. We’ll see you subsequent time for the BiggerPockets podcast.