Introduction to 2025

If the housing market could be summed up for this year in a concise statement it would be “continued uncertainty and affordability.” In my 2024 housing market outlook I predicted with interest rates easing a bit, and unemployment, inflation and wages moving in the right direction I thought 2024 would see a rise in more buyers entering the market. That did not go as I expected. Instead we saw an increase in homes for sale with fewer buyers. I did however predict that housing prices would stay relatively unchanged and the days on market could be a 3-month long journey.

This year I’m taking a more pessimistic view for the housing market. With a new administration and interest rates staying pretty high throughout 2024 (compared to the past 5 years) the lackluster 2024 sales lead me to believe that more homes will come on the market as the new norm of high interest rates will see those “rate locked” sellers begin to get itchy and possibly try and cash out on the built-up equity over the past few years. Those sellers will ultimately be competing with owners that have to make a move because of family, work or other personal issues. This could lead to a groundswell of homes for sale and very few buyers.

2024 Recap

Nationally the sales of previously owned homes in 2024 nationwide totaled 4.06 million, marking the lowest level since 1995. The median price of an existing home reached a record high of $407,500 with a median home price increase of 4.9%. Mortgage rates for a 30-year fixed mortgage peaked at 7.22% before settling at 6.96% in the last week of the year. The combination of high rates and prices made homeownership unattainable for many. Concerns about inflation and market volatility made consumers hesitant to buy. Homeowners with lower mortgage rates were reluctant to sell, further limiting the supply. This phenomenon was coined the “Lock-in effect.”

In Pueblo County we saw an increase in the median home price from $315,850 to $320,000 for a 1.3% increase in home values. The number of homes for sale increased 4.2% over the previous year with an 8.7% decline in overall sales. At the end of 2023 there were 798 homes for sale and in December of 2024 there were 901 homes which marked a 12.9% increase. We also saw 2023 months of supply at 3.6 and 2024 coming in at 4.5 months for a 25% increase in the number of homes for sale.

2025 Housing Market Concerns

The U.S. economy and housing market in 2025 are predicted to be characterized by significant uncertainty, largely driven by the potential economic policies of the incoming Trump administration. While economists generally acknowledge the resilience of the U.S. economy post-pandemic (low unemployment, contained inflation, wage growth), consumers continue to feel “pain points” such as high housing costs, steep interest rates, increasing debt delinquency, and low savings. This creates a disconnect in perception, dubbed a “vibecession” by some.

The prevailing outlook suggests moderately increasing home prices, fluctuating but generally high mortgage rates, and a gradual increase in inventory. Home sales are expected to see a modest rebound due to pent-up demand, but affordability challenges will persist, pushing many would-be buyers towards renting. The rental market is anticipated to become more favorable for renters with flat asking rents and increased supply. A potential major wildcard is the risk of stagflation if proposed policies lead to both inflation and economic weakening.

Housing Market Predictions

Lending Tree Predicts

Home prices will rise slightly… annual home price growth in 2025 is roughly on par with where it was in much of 2024 — between 3% and 5%.
Mass deportations could make it “considerably more difficult and expensive for builders to construct homes… This will make new (and older) homes more expensive and decrease the overall U.S. housing supply” and housing will “remain prohibitively expensive for many.”
Redfin predicts
A “4% rise” in the median U.S. home-sale price, attributing it to insufficient new inventory to meet demand and highlights that the “mortgage-rate lock-in effect will put a lid on the amount of existing inventory competing with new builds. Redfin also predicts homebuilders to “construct more single-family homes in 2025” due to “renewed optimism that regulatory burdens may ease.” However, high interest rates and “cut back on immigration, which would likely lead to less residential construction” are headwinds

The National Association of REALTORS predicts

“Stronger home sales (rebounding after hitting a 15-year low in the summer)… +7% to 12% for existing-home sales in 2025.” (NAR) This is partly driven by the expectation that “if mortgage rates fall to 6%—as NAR predicts they likely will in 2025—homeownership could be made more affordable to about 6.2 million more prospective buyers.” NAR also expects a “greater number of homes coming up For Sale—both newly built and existing.” (NAR) Housing inventories made “sizable gains, with listings up about 20% annually in October.” NAR also projects new home construction to “reach the historical annual average of 1.5 million units over the next couple of years.” with builders focusing on “exurbs and outer suburbs” and using sales incentives.

Are you planning on buying a home in 2025?

If you’re planning on buying a home in 2025 lower mortgage rates will allow you to qualify for more but don’t expect the prices of homes to drop much. Get your finances in order. Pay off high interest credit cards starting with the highest interest rates or those cards where you have the largest balances. Consider looking at first time home buyer assistance programs where the down payment is only 3.5% of your home purchase. Also talk to a real estate professional that can help you understand the mechanics of buying a home and can offer advice on what mortgage lenders to talk to.

Are you planning on selling a home in 2025?

Many factors should be considered if you plan on selling in 2025. Consider getting a pre-listing inspection and make any necessary repairs to make your home stand out is a good first start. Clean and de-clutter the home to make sure your home stands out among the competition. Be prepared for the long haul, statistically you could be on the market as long as three to six months before you get a competitive offer on your home. Speak to a mortgage lender to find out what your options will be when you’re ready to move and have a budget in mind when you go looking for that replacement home. You could consider using a bridge loan which would allow you to find a replacement home and move into it while your current home is still on the market. And most importantly make sure you talk with a real estate professional that understands the market, has a track record of getting the most money out of the sale of your home with the least amount of hassles.

Bottom line in the 2025 housing market

Given all the statistics above, 2025 will continue to be a challenge for both buyers and sellers. For buyers’ affordability will remain the key factor and for sellers the lack of buyers in the market will continue to be a challenge. If rates do continue to come down, then this will spur more activity. This means now more than ever relying on a real estate professional to help you make decisions based on your circumstances will prove to be valuable in 2024.