Why 2025 is Shaping Up to Be a Turning Point for Real Estate
Shared by Meg Surowiec
For the last couple of years, the housing market has felt like it was stuck in slow motion.
Sales were at their lowest in nearly three decades, mortgage rates were the highest we’d seen in years, and affordability hit historic lows. It wasn’t just buyers and sellers feeling the pinch — real estate agents, mortgage lenders, title companies, moving services, and countless other businesses tied to real estate saw a major slowdown.
But here’s the good news: 2025 is already showing signs that things are turning around — and this shift could open doors for buyers, sellers, and investors alike.
The Market’s Mood is Changing
📈 Sales are picking up.
The turnaround actually started in the final months of 2024. That upward trend is expected to continue as we move further into 2025.
🏡 More homes to choose from.
The inventory shortage is finally easing. This means buyers have more options — and the fierce bidding wars of a few years ago are becoming less common.
💲 Mortgage rates are cooling off.
While rates aren’t back to the ultra-low 4–5% range we saw several years ago, they’re trending down from the 7–8% highs we had in recent months.
💼 Wages are catching up.
Incomes have been growing just slightly faster than home prices, which helps improve affordability for buyers.
Why the Shift is Happening
1. The Federal Reserve is cutting rates.
The Fed has already started lowering its short-term bank lending rate, and more cuts are expected in 2025. While mortgage rates don’t always fall in sync, these changes usually help rates ease over time.
2. Rent inflation is finally cooling.
A record-breaking 560,000 new apartments hit the market in 2024 — the highest number since the early 1980s. This big wave of supply has kept rent growth flat, even if the government’s official numbers haven’t fully caught up yet.
3. A strong economy and job market.
GDP growth has been close to 3%, and job gains are steady. This creates a solid foundation for more people to enter the housing market.
What to Expect in 2025 and Beyond
Mortgage rates may find a “new normal” between 6–7%.
If government spending is reduced significantly, there’s a chance rates could dip into the mid-5% range.
FHA and VA buyers could have more success.
During the peak of bidding wars, these buyers often struggled to compete. With more homes available now, FHA and VA loans could be more widely accepted.
Steady home sales over the next four years.
We could see around 20 million existing-home sales and 3.5 million new-home sales in that time frame.
Commercial real estate will see mixed results.
The retail sector could see rents rise due to limited new construction.
Industrial spaces may see rising rents because online shopping continues to grow faster than brick-and-mortar retail.
Apartment rents might rise again starting in 2026 after the market absorbs all the new units built in 2024.
Office spaces will continue to face high vacancy rates, especially with the shift toward hybrid work schedules. Landlords may need to offer rent concessions to attract tenants.
Some challenges remain for commercial refinancing.
Many loans from the low-rate COVID years are coming due in the next 2–3 years. With higher rates now, refinancing could mean bringing more cash to the table. Still, extending loans is often a better option for lenders than foreclosing and selling at a discount.
The Takeaway
After years of sky-high rates, tight inventory, and sluggish sales, the real estate market is moving toward balance. Lower inflation, more inventory, and a solid economy are creating better opportunities for buyers and sellers.
If you’ve been waiting for the right time to make a move — whether it’s buying, selling, or investing — 2025 might be the year to do it.
Source: Lawrence Yun, Chief Economist, National Association of REALTORS® — “Things Are Looking Up,” February 18, 2025. Actual link for article from NAR.https://www.nar.realtor/magazine/real-estate-news/economy/things-are-looking-up