Posted: 12/23/2024 | Source: Altos Research
The 2025 housing market is already shaping up to be a year of transition, as we move from the tumultuous pandemic years into a phase of normalization. Altos Research founder Mike Simonson has shared a detailed forecast that offers optimism and clarity for buyers, sellers, and industry professionals alike. Here’s a breakdown of the key trends and insights to watch as the new year unfolds.
Inventory: A Return to Pre-Pandemic Levels?
After years of record-low inventory, the housing market is finally seeing an uptick in the number of unsold homes. With 690,000 single-family homes currently on the market, inventory is up 26% from last year and only 17% shy of 2019 levels—an era many consider a benchmark for “normal” market conditions.
This gradual rise in supply is attributed not to an influx of sellers, but rather to reduced demand due to higher mortgage rates. However, areas like Florida and Texas are exceptions, where rising insurance costs and climate risks are encouraging more sellers to enter the market.
Buyer Activity: Momentum Builds for 2025
Buyer demand, though subdued in recent years, has shown signs of life in late 2024. Pending home sales are up by about 10% compared to the same period last year, with weekly averages stabilizing at 51,000 sales. This uptick suggests a growing, albeit cautious, interest in homeownership heading into 2025.
While the market isn’t expecting a dramatic surge in buyers, this steady growth reflects a normalization that many industry insiders have been waiting for. As Mike Simonson aptly puts it, “Slight growth, but not explosive growth” defines the forecast for the coming year.
Home Prices: Stable Growth Amid Rising Inventory
The median price of single-family homes in the U.S. currently stands at $384,900, marking a 5% increase from last year. Although this growth rate is robust, Altos Research predicts a slower pace of appreciation in 2025, estimating a 3.5% annual increase. This tempered outlook reflects a balance between rising inventory and modestly improving demand.
For buyers waiting on a market crash, Simonson has a clear message: “There are no signs anywhere in the data of home prices crashing.” Instead, he anticipates a stable pricing environment with occasional softening in specific markets like Tampa.
Regional Variances: A Tale of Two Markets
The forecast highlights stark differences between regions:
- Northern Cities: Characterized by tight inventory and rising prices, these markets continue to see competitive conditions.
- Sun Belt Cities: Facing challenges like increased unsold inventory, some areas are experiencing slight price declines.
These contrasts underscore the importance of local market conditions in shaping housing trends. Buyers and sellers alike must stay informed about their specific regions to make the best decisions.
Key Takeaways for 2025
- Rising Inventory: Inventory levels are climbing, offering buyers more choices and reducing the frenzied competition of past years.
- Gradual Price Growth: Expect a modest 3.5% appreciation in home prices, with no significant price corrections on the horizon.
- Steady Buyer Demand: While not booming, buyer activity is increasing, particularly among those who waited out the uncertainties of recent years.
- Regional Nuances: Local markets will continue to vary widely, with some areas returning to normalcy faster than others.
Prepare for the Market Ahead
As we enter this period of normalization, it’s critical to stay ahead of the trends. Whether you’re buying, selling, or investing, understanding the local nuances of your market is essential. At Team Tami, we pride ourselves on keeping our clients informed and empowered to make the best decisions.
Ready to navigate the evolving housing landscape? Contact Team Tami today for expert guidance tailored to your needs. And for a deeper dive into the data driving these trends, check out Altos Research’s full forecast here.
Let’s make 2025 your year in real estate. Reach out to us today!