‘Tis not only the holiday season, but also that time of year when practically everyone weighs in with what they think next year holds for the housing sector.
On cue, now comes forth the latest forecast from the National Association of Realtors (NAR), the 1.5 million-member trade-group behemoth representing agents, brokers, and allied professionals.
Released Thursday at a virtual summit, the beleaguered trade group’s report suggests a more stable housing market with a gradually increasing inventory of houses for sale and a “new normal” for mortgage rates at “around” 6%. At that rate, NAR economists say, about 6.2 million more households can once again afford median-priced houses.
Actually, any rate below 6.5% would spur the market, they say, because the income needed to qualify a median-priced dwelling has dipped below $100,000. And that’s less than the median family income.
In it’s report, the trade group, as it does every year, also highlighted what it believes will be the top performing markets next year. In alphabetical order, the top ten are: Boston, Charlotte, Grand Rapids, Greenville, Hartford, Indianapolis, Kansas City, Knoxville, Phoenix and San Antonio.
NAR economists identified these hot spots based on 10 factors, including the share of owners locked into their homes because they carry low-rate mortgages, the typical mortgage rate for the area, job growth and the share of Millennial renters who can afford to purchase a house.
Other factors include net migration relative to the overall population, the share of households reaching their prime home buying ages within the next five years, the share of out-of-state movers buying houses, the share of owners surpassing the average length of tenure, the share of starter-owner occupied units and price appreciation.
However, the 2025 outlook published recently by Bright MLS, a large Mid-Atlantic regional multiple listing service, says people with more moderate incomes may find it more difficult to buy a house next year while their higher-income brethren will be more insulated from economic uncertainty.
Bright’s chief economist, Lisa Sturtevant, expects rates to stay around 6.25%, not as low as home buyers might like, but lower than the 6.6-6.8% rates in late 2024.
“Rates are going to be volatile through the end of (this) year and into next year as the market responds to fresh economic data and to anticipated policy initiatives from President-elect Trump,” she said in her report.
Bright covers six states – Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia -- and the District of Columbia.
Both forecasts are bullish on housing inventories. While inventory levels are not expected to reach their pre-pandemic norms, NAR says they are improving and are “poised to increase further” in the coming year. The expected uptick will be led by the new construction market, where housing starts will approach the historical average annual level of 1.5 million units.
Specifically, it predicts builders will start work on 1.45 million new dwellings in 2025, 1.11 million of which will be single-family houses.
Sturtevant predicted the total inventory of existing homes for sale will reach 1.32 million listings. That’s a 12.8% increase over 2024, but still about 5% lower than number of houses on the market at the end of 2019.
The Bright economist also is calling for rising house prices next year, but at a slower pace. Because of various “push and pull” factors – somewhat lower loan costs and rising inventories, among them – she expects the median price for an existing home sold in 2025 will be $418,390, a 3.1% increase over the 2024 median of $406,600. That compares to a 4.3% gain this year over last.
NAR, on the other hand, is looking for the median to hit only $410,700 next year on 4.5 million used houses sold. The trade association also is calling for prices to crawl up by just 2%.
Overall, though, people venturing into the market in 2025 “will have more success,” NAR Chief Economist Lawrence Yun said. “The worst of the affordability challenges are over as more inventory, stable mortgage rates and continued job and income growth pave the way for more Americans to achieve home ownership.”
