Things to Know About the 2025 Housing Market
As we approach the end of 2024 and prepare to welcome in the new year, the real estate market also prepares for some upcoming changes and shifts. If you or someone you know are planning to buy, rent, sell, or lease property in 2025, you’ll need to know how to keep up with a rapidly developing market to make well-informed decisions.
We already have an idea of what to look out for by reviewing the year of 2024 and the directions of growing trends. If there’s one thing you can take away from the past year, it’s that the housing market has grown increasingly competitive.
How can buyers or sellers navigate 2025 successfully in the housing market? Let’s discuss some topics that you should stay up-to-date on.
Modest Home Value Growth
After years of rapid price increases, 2024 brought a welcome slowdown in home value growth, and 2025 is expected to continue this trend. Nationally, home values are forecast to grow by 2.6%, offering some relief to financially stretched buyers. This outlook assumes interest rates will hover around 6.5% and more sellers will list their homes, potentially leading to 4.3 million existing home sales in 2025, a slight increase from 2024’s projected 4 million.
While a calmer market could improve affordability and give buyers more time to save for down payments, challenges remain, and conditions vary by location. Hartford is expected to see the largest home value increase among major metros, with 4.2% growth projected, while New Orleans could face a 3.8% decline. The combination of steady rates, increased listings, and income growth will be key factors shaping affordability in 2025.
A Growing Buyers’ Market in Southern & Southwestern US
In 2025, the Southwest is set to join the Midwest and South as regions with markets increasingly favoring buyers. In these markets, homes typically stay on the market longer, see more frequent price cuts, and often sell below the asking price. Sellers in such conditions will need to focus on competitive pricing and effective marketing to stand out amid increased competition.
This shift is expected due to rising affordability and more homeowners listing properties as interest rates ease. However, if mortgage rates drop significantly, the trend could reverse. Lower rates might attract more buyers than sellers, increasing competition and shifting the advantage back to sellers.
Difficulties for New Renters
Throughout the past year, renters benefited from various concessions as expansions and rental construction hit a 50-year high, easing competition for units. However, this building boom is expected to slow significantly by the end of 2025, with new rental construction projected to drop 21% in the first half of the year and decline further later on. This reduction in supply is likely to stabilize apartment rents, making it harder for renters to negotiate perks like free rent.
Despite the slowdown, the decline follows an exceptional year for rental construction, meaning dramatic rent hikes are unlikely. As of late 2024, the typical U.S. rent was 3.3% higher from the previous year, reflecting a moderate rise even amidst shifting market dynamics.
Sellers: Look Out for the Pet-Owners
If you’re planning on listing a property for rent, be ready to accommodate potential pet-owner buyers. Rentals are increasingly becoming home to both animal companions and children, as newly formed households save for down payments and seek affordable options. With 60% of renters now owning pets—up from 46% pre-pandemic—pet-friendly properties are becoming the norm. Many apartment-seekers have reported skipping properties that weren’t pet-friendly, pushing property managers to adapt to this growing demand.
As more families with young children move into rentals, expect an uptick in family-focused amenities. These changes reflect the evolving needs of renters, making flexibility and inclusivity key priorities in the rental market.
Shifts Towards Smaller Property Sizes
After years of favoring spacious living, Americans are embracing a shift toward smaller, cozier homes. Many potential buyers and renters throughout 2024 have specifically hunted for small, cozy properties, reflecting a growing preference for affordability and sustainability over open floor plans. Buyers are opting for compact, purpose-driven spaces like offices and dining rooms, marking a departure from the previous demand for expansive layouts.
Cost is a major driver of this trend, as smaller homes are generally less expensive to buy, furnish, heat, and insure. Beyond financial considerations, the shift also reflects a desire for more intimate, comfortable living spaces, signaling a broader cultural embrace of coziness and practicality in home design.
Conclusion: Conduct Thorough Research in 2025
As 2025 approaches, the real estate market is set to undergo significant shifts, from slowing home value growth to evolving rental trends and a growing preference for smaller, cozier spaces. Whether you’re buying, selling, or renting, staying informed about these changes will be key to making smart decisions.
By understanding market dynamics and adapting to emerging trends, individuals can navigate the challenges and opportunities of the housing market with confidence in the coming year.
Are you looking to list, buy or rent a property in Texas this upcoming year? Oscar Combs Realtor offers many services for both buyers and sellers to assist in navigating the housing market. Contact us today to learn more.
Sources: Zillow
