Estimated read time: 3-4 minutes
Moving into 2025, the housing market is set to experience a mix of recovery and challenges. Housing economists predict improved affordability, a rebound in sales activity and increased inventory levels, paving the way for a more balanced market after two years of sluggish performance. However, persistent affordability issues and potential economic disruptions could temper the optimism.
Improved affordability with lower mortgage rates
A key driver of the housing rebound is the anticipated decline in mortgage rates. The National Association of Realtors forecasts that rates will stabilize around 6%, a significant drop from the 7% highs seen in recent years.
Lower rates could make homeownership more accessible to approximately 6.2 million additional prospective buyers, according to Realtors Association Chief Economist Lawrence Yun. This improvement in affordability is expected to re-energize buyer activity and support a steady recovery in the housing market.
Rising inventory and new construction
Housing inventory levels are expected to continue their upward trajectory, with listings rising by about 20% annually as of late 2024. In Utah, active listings as of Jan. 15 increased to 9,313 units for sale, up 23.7% compared to the same day a year ago, according to UtahRealEstate.com. This growth is driven by stabilizing mortgage rates, improved market conditions, and a motivated pool of sellers.
New home construction is also set to contribute to the inventory boost. The National Association of Realtors projects that housing starts will reach the historical average of 1.5 million units annually over the next few years. Builders are employing sales incentives, such as mortgage rate buy-downs and amenity upgrades, to attract buyers.
Modest price growth
Home prices are expected to rise, albeit at a slower pace. The National Association of Realtors predicts a 2% national increase, bringing the median existing-home price to $410,700.
Utah, a traditionally strong market, is expected to see similar growth, with median sales prices of all housing types increasing from $505,000 in 2024 to $520,000 in 2025. This moderation in price appreciation provides some relief to buyers, particularly those grappling with affordability challenges.
Homeowners continue to benefit from record-high equity levels, with the median net worth of homeowners projected to reach $415,000, compared to $10,000 for renters. A growing number of repeat buyers are leveraging their equity to make cash purchases, which accounted for 26% of the market in 2024, according to Jessica Lautz, National Association of Realtors deputy chief economist.
Sales activity on the rise
The housing market is poised for a rebound in sales activity, with the NAR projecting a 9% increase in home sales for 2025. Improved consumer confidence and increased inventory levels are expected to drive this growth. However, affordability challenges remain a hurdle, particularly for first-time buyers. Repeat buyers, buoyed by substantial equity, are likely to dominate the market in the near term.
Opportunities and challenges
The 2025 housing market presents a blend of opportunities and challenges. Lower mortgage rates, increased inventory, and modest price growth are set to create a more favorable environment for buyers and sellers alike.
Economist Yun added, "There will be less mortgage money available because the government is borrowing so much money. However, if the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward."
He also explained that another way to address the budget deficit is to bring down the price of housing. "We have to have more supply. Per our advocacy efforts, we're trying everything we can to boost supply," Yun said.
