After two tough years, the U.S. housing market is expected to bounce back in 2025. Experts predict higher home sales, slower price growth and better opportunities in cities like Boston, Phoenix, and Grand Rapids, Michigan.
This outlook comes from the National Association of Realtors (NAR), a group representing 1.5 million real estate professionals nationwide.
Signs of Recovery
Lawrence Yun, the chief economist at the NAR, shared hopeful news at their annual real estate forecast summit. In October 2024, existing-home sales finally rose above last year’s levels for the first time since mid-2021.
More people are also signing contracts, suggesting the housing market might be recovering.
Although home sales in 2024 are likely to stay similar to 2023’s record low, 2025 could see a big comeback, with sales expected to grow by 7% to 12%.
Slower Price Growth Brings Hope
Home prices are expected to keep rising, but more slowly. The median price of a previously owned home is predicted to be $410,700 in 2025, just 2% higher than in 2024. This slower hike could make homes more affordable as incomes start to catch up.
With more homes available for sale, price growth may finally slow down, says Yun, adding that that would be a healthy change, allowing incomes to close the gap with home prices.
The Role of Mortgage Rates
Mortgage rates are key to revitalizing the housing market. The NAR expects rates to settle around 6% in 2025, a bit lower than the recent average of 6.6%. Lower rates could attract more buyers who have held back because of high costs.
Steady rates might also provoke more homeowners to sell, helping with the limited supply of homes. Right now, many homeowners are reluctant to sell because they locked in very low rates during the pandemic and don’t want to switch to higher payments.
The Hottest Markets for 2025
The NAR evaluated more than 350 metropolitan areas to identify the top 10 housing markets for 2025. These areas stand out for their balance of affordable inventory, job growth and millennial homebuying potential. The list includes:
Boston, MA
Phoenix, AZ
Charlotte, NC
San Antonio, TX
Indianapolis, IN
Grand Rapids, MI
Greenville, SC
Hartford, CT
Kansas City, MO
Knoxville, TN
Why Those Markets?
Several factors make those cities appealing to buyers and sellers:
Affordable Homes – Cities with reasonably priced homes are more likely to attract buyers, especially first-time ones.
Job Growth – More job opportunities create a need for housing, especially in growing metro areas.
Millennial Buyers – Areas with more millennials entering their homebuying years will see higher demand for starter homes.
Lower Lock-In Effect – Cities where fewer homeowners are stuck with very low mortgage rates will likely have fewer inventory shortages.
Take Grand Rapids, MI, for example. The NAR points out that 36% of renters in the area are millennials who can afford to buy homes, and 12% of households will hit homebuying age in the next five years, creating strong demand.
In Boston, as mortgage rates stabilize, more homeowners may be willing to sell. That could ease the city’s housing shortages, thereby making it easier for buyers to find homes.
A Promising Year Ahead
As mortgage rates steady, job markets strengthen, and more homes become available, 2025 could mark a turning point for the housing market. Although high prices and affordability issues haunt homebuyers, the outlook is better than it has been in a long time.
For buyers and sellers alike, the year ahead may bring new opportunities across the country. The future could be even brighter if you’re in one of the top 10 metro areas.
