Redfin’s 2025 Housing Market Predictions (Residence Costs, Mortgage Charges, & Extra)

Dave:
It’s prediction season. As we wind down 2024, nearly everybody is occurring document about what they suppose will occur to the true property market in 2025. Redfin is likely one of the most dependable sources round for actual property business information. So immediately I’m going to overview their predictions that their economics workforce put collectively for 2025. They’ve put collectively a complete of 10 predictions and I’ll let you know I undoubtedly don’t agree with all of them, so make certain to stay round to see the place we differ in opinion. And if you wish to see all of my private predictions for actual property in 2025, you possibly can take a look at our YouTube channel or possibly you’re watching there already, however in case you’re listening to this as a podcast, we not too long ago launched movies about the place I see mortgage charges, house costs and rents trending within the subsequent 12 months. So you possibly can go verify these out.

Dave:
Alright, onto Redfin’s prediction primary. First prediction from Redfin in regards to the housing market in 2025 reads, house costs will rise 4% in 2025. I’ll simply learn you all a few strains that specify a few of their logic right here after which I’ll offer you my response to it. Redfin writes, we count on the median US house sale worth to rise steadily all through 2025, ending the 12 months 4% increased than it was in 2024. Costs will rise at a tempo much like that of the second half of 2024 as a result of we don’t count on there to be sufficient new stock to fulfill demand. Rising costs are one issue that may hold house possession out of attain for a lot of Individuals main some could be house consumers to lease as a substitute. So Redfin thinks that costs will develop 4%. I believe this can be a fairly reasonable prediction. I’ve checked out in all probability, I don’t know, 10, 12, possibly 15 totally different predictions.

Dave:
That is from massive corporations that you just’ve in all probability heard of like Redfin or Zillow or extra specialty boutique retailers, lenders who all make these types of predictions and the consensus appears to be that house costs will rise someplace between two to five% subsequent 12 months. In nominal phrases, I’ve made a few of my very own predictions for the next 12 months and I truly got here out possibly simply barely decrease than this, three, three and a half %, however at that time you’re type of splitting hairs. So I typically agree with this, however let’s simply speak about why. And it appears like a variety of different forecasters suppose that we’re going to see fairly secure home development, like 4% or wherever actually across the tempo of inflation is what is taken into account regular appreciation or worth development within the housing market. And so let’s simply speak just a little bit about why we predict that the majority of us not less than suppose that costs are going to go up just a little bit.

Dave:
The very first thing to me is simply pattern, proper? We now have seen house costs going up for the final a number of years. After all, previous outcomes usually are not indicative of future outcomes, however for the final a number of years, even excessive rates of interest, now we have seen demand outpace provide. Lots of people thought the housing market was going to crash in 2022 when charges went up. It didn’t. Individuals thought that they’d crash in 2023 or not less than come down just a little bit. They didn’t, not less than on a nationwide degree. Positively some markets that did identical factor in 2024 folks mentioned it’s going to decelerate, they’re going to go unfavorable. Certain there are locations in Texas or Louisiana which are unfavorable, however on a nationwide degree we’re nonetheless up about 4%. Some folks even say 5% 12 months over 12 months and that’s above common development. The long-term common is like 3.4%.

Dave:
So I believe this concept that the housing market goes to crash or that costs are going to return down as a result of demand goes to evaporate, I simply don’t suppose that’s true. It hasn’t occurred. We’ve seen the worst of mortgage charges enhance and it hasn’t induced a crash but, and there’s a variety of motive to consider that within the coming 12 months in 2025 that there’s truly going to be extra demand In simply the final couple of weeks for the reason that presidential election, there are a few measurements of demand which have began to tick up and present some extra life within the housing market. One comes from Redfin, the corporate we’re speaking about immediately, however they’ve their very own measurement of demand. It’s like a house purchaser index and mainly it simply tracks how many individuals on their web site request excursions and are wanting round their web site and so they monitor this and been doing it for years and it has gone up considerably for the reason that election 17% month over month and it’s truly on the highest level it has been at since September of 2023.

Dave:
So there’s an indication that demand is definitely going up for homes, however in fact we will’t speak about demand with out speaking about provide and now we have to consider whether or not provide goes to return again proportionally and we’re seeing new listings tick up, however just a bit bit with rates of interest forecast to in all probability go down and due to another tendencies, it does seem to be we’re additionally going to see some extra provide subsequent 12 months. However my expectation, and it type of looks as if that is what Redfin is getting at as properly, is that each demand and provide are going to return again at a comparatively equal tempo. And if this occurs, then worth development will keep in all probability fairly much like the place it’s this 12 months. And in order that’s why Redfin and I believe a variety of different forecasters are predicting that we’ll see related development charges in 2025 to what we noticed right here in 2024.

Dave:
I believe it may be just a little bit decrease on a nationwide degree, however I’m mainly simply splitting hairs. So total I agree with Redfin on this one. Redfin’s second prediction for 2025 reads mortgage charges will stay close to 7%. Mortgage charges are prone to stay within the excessive sixes vary all through 2025 with the weekly common charge fluctuating all year long, however averaging round 6.8%. Traders are anticipating that if president-elect Donald Trump implements a good portion of his tax cuts and tariffs and the financial system stays robust, the Fed will solely reduce its coverage charge twice in 2025. Preserving mortgage charges excessive tariffs could possibly be inflationary and enacting extra tax cuts would enhance the US deficit, each of which might push mortgage charges up. Excessive mortgage charges are the second a part of the equation that may hold house shopping for unaffordable. Okay, there’s lots to dig into with this one, however mortgage charges remaining close to 7%.

Dave:
I don’t essentially agree with this. I do agree with the sentiment that charges are going to remain increased than most individuals suppose. For those who go on social media or in case you take a look at a variety of forecasters, persons are saying that charges are going to get into the fives. I’ve heard folks say that they’re going to get into the fours and personally I don’t consider any of that. I believe that charges are going to remain someplace within the sixes subsequent 12 months. I do suppose there’ll be just a little bit decrease than Redfin is predicting. So let me simply clarify briefly why I believe charges are going to remain just a little bit increased. All of it comes right down to bond yields and I do know that is boring in case you’ve heard me speak about this, however simply give me one minute and I’ll strive my greatest to clarify this to you.

Dave:
Mortgage charges usually are not managed by the Fed. They’re actually influenced by bond traders and bond traders don’t actually suppose like actual property traders or like inventory traders. They’re majorly involved with issues like inflation and recession threat. And sometimes when inflation is on their thoughts, in the event that they’re fearful about inflation, meaning bond yields go up and that pushes mortgage charges up when as a substitute of inflation, traders are fearful in regards to the different facet of the equation, which is a recession. They often pour cash into bonds that pushes yields down and take mortgage charges down as properly. And so the rationale I’m saying that I believe that bond yields are going to remain up is as a result of not less than the market is telling us proper now that bond traders are extra afraid of inflation within the coming years than they’re of a recession. The financial system by most conventional metrics has seemed okay during the last 12 months and Trump has promised to implement a variety of stimulative insurance policies that are prone to increase the financial system.

Dave:
When an financial system will get boosted an excessive amount of, there may be worry of inflation and in order that’s possible what we’re seeing proper now with charges staying excessive. That’s why mortgage charges, even for the reason that Fed charge reduce in September have elevated. All of that is to say I believe we’ll see a robust financial system subsequent 12 months and meaning mortgage charges will possible keep increased, however I do suppose we’re type of on this hopefully lengthy downward pattern for mortgage charges. After I say lengthy downward pattern, I believe it’s going to take greater than a 12 months for them to type of settle into the brand new regular. And I’m hopeful, I don’t know, this isn’t a prediction, however I’m hopeful that the brand new regular might be someplace round 5 and a half % that’s near the long-term common. It type of is smart given what the Fed has mentioned they’re going to do.

Dave:
That’s type of what I’m pondering, however I don’t suppose that’s going to occur in 2025. Personally, I believe it’s extra possible that that occurs in 2026, possibly even to 2027. It’s simply not going to maneuver as shortly as issues have within the final couple of months. And that’s why I believe traders, everybody listening to that is higher off planning for a better rate of interest surroundings and making funding selections based mostly on that. And if I’m improper and charges go down extra, nice, that implies that you’re going to have much more tailwinds to assist your investing. However being cautious and presuming that charges are going to remain just a little bit increased will enable you be just a little bit extra conservative and defend your self towards any draw back threat. So to date we’ve talked about redfin’s predictions about house costs and mortgage charges. Subsequent we’re going to speak in regards to the course of house gross sales quantity in 2025 proper after the break.

Dave:
Hey everybody, welcome again to the present. In the present day we’re reviewing redfin’s 2025 predictions for the housing market and we’re on to prediction quantity three, which reads, there might be extra house gross sales in 2025 than 2024. Gosh, I hope that is proper and I believe it’s. We now have been in, some folks have been calling it a housing recession or a droop or a slowdown or the market is caught, no matter. The very fact is that there simply aren’t that many properties being offered proper now in comparison with historic norms for 2024. The 12 months’s not over but, however now we have a excessive diploma of confidence that the variety of properties that might be offered this 12 months might be lower than 4 million and 4 million remains to be lots, proper? We now have to be trustworthy {that a} slowdown just isn’t that loopy as a result of there’s nonetheless 4 million, however it’s a very massive distinction in comparison with the long-term common, which is about 5 and 1 / 4 million.

Dave:
So it’s like 2020 5% down from the long-term common and it’s also down greater than 50% from the height in 2021 when it was promoting an annualized charge of 6.7 million. So that’s actually loopy as a result of it’s down from the long-term common, however once you examine the place we’re immediately to the place we had been simply three years in the past, the delta, the change has been simply huge. And so having house gross sales begin to decide up could be a great factor and I do suppose that’s going to occur. Why I believe house gross sales are going to extend is predicated on what I used to be saying earlier, we talked just a little bit within the first part. We had been speaking about house costs, about provide and demand, and I informed you that I believe that demand goes to return again. I don’t understand how aggressively, however I do suppose there might be a rise in demand in 2025 and I additionally suppose there might be a rise in provide and simply reverting again to econ 1 0 1, in case you take a look at provide and demand, if each issues go up, if provide goes up and demand goes up, quantity goes up, amount goes up.

Dave:
And so there’s I believe a very good case to be made that there’s going to be extra house gross sales in 2025 than 2024. So I completely agree with this one. That mentioned, earlier than we transfer on, I simply need to caveat this and say that it’s in all probability going to be a small enhance. We’re in all probability speaking, Redfin says they suppose that it’s going to go as much as 4.1 million to 4.4 million, in order that’s possibly a two, three, 4% enhance, possibly just a little bit increased than that, however that’s not going to revive house gross sales quantity to the long-term common, however it’s a step in the fitting course. For those who’re choosing up on the theme of what I believe goes to occur subsequent 12 months, it’s that issues are going to get higher, however simply marginally. So I don’t suppose we’re reverting again. We’re not going again to this era the place now we have large affordability, huge house gross sales, large house worth appreciation.

Dave:
I believe it’s going to be an extended, gradual and regular restoration for the housing market, however you bought to begin someplace, proper? We now have to hit a backside and begin turning round and I believe that that is the time that that’s going to occur. I believe 2024 goes to signify the low for house gross sales for us and as we go into 2025, we’re going to see a barely extra lively market and hopefully that may simply construct on itself after 2025 within the out years in order that we restore a extra wholesome, strong and lively market. Alright, properly on to Redfin’s fourth prediction, which reads 2025 might be a renter’s market. There are clarification reads, many Individuals will stay renters or change into renters whereas the price of shopping for a house will enhance, rental affordability will enhance. We count on the median US asking lease to stay flat 12 months over 12 months in 2025, that may make lease funds extra reasonably priced to the standard American as a result of wages will rise.

Dave:
There may also be extra new leases coming available on the market with lots of the models builders began engaged on throughout the pandemic condominium constructing, increase coming to fruition. This can create extra provide than demand. Motivating landlords who supply concessions like free parking a month of free lease, extra facilities or hiatus on lease will increase so as to retain residents. I couldn’t have written this one higher myself. I wholeheartedly agree with this prediction from Redfin. They’re mainly saying that that is going to be a 12 months the place tenants and renters have extra of the facility in negotiating lease costs. This once more simply comes right down to a provide and demand query. We’ve lined this a bit on the present, however proper now we’re on this type of distinctive time within the housing market the place we’re seeing mainly only a flood of latest flats coming on-line. It is because throughout 20 21, 20 22 issues had been nice for multifamily operators, rents had been going up, cap charges had been low, valuations had been skyrocketing, and builders needed to get in on that.

Dave:
And they also began constructing a ton of multifamily properties in a variety of sizzling markets all through the south and the Sunbelt, you in all probability know a bunch of this, however as a result of multifamily takes a number of years to finish, we’re solely simply now seeing all of these models from this constructing, increase, come on-line and hit the market. And the cool factor about multifamily investing is that every one the info is there. It’s very easy to forecast this and you may mainly see that by way of the primary half of 2025, that dynamic goes to proceed and this can harm lease development, proper? That is once more, provide and demand. There’s simply going to be too many flats accessible for lease for the quantity of people that need to lease these flats. And that implies that operators, landlords, property house owners have to compete for tenants. And the way do they compete for tenants?

Dave:
Properly, Redfin talked about it. It’s like stuff like a month of free lease, decreasing rents, free parking, all issues which are going to decrease revenue, decrease earnings for traders and be helpful to tenants. And so once they say that they suppose 2025 might be a renter’s market, I agree, it’s not like rents are taking place. They’re truly comparatively flat on a nominal foundation proper now, and I don’t truly suppose that they’re going to go unfavorable in a nominal phrases subsequent 12 months. I simply suppose they’re going to in all probability develop decrease than the tempo of inflation. And though that’s not one thing to panic about, if now we have unfavorable 1% actual returns, that’s hopefully not going to actually change something for anybody. However it’s one thing to notice as a result of clearly as traders, your whole bills are going to go up, insurance coverage goes loopy, taxes are going up, labor supplies, all these various things are going up, however your rents are in all probability not going to maintain tempo with that.

Dave:
Once more, this isn’t in each market, however on a nationwide scale that’s possible the dynamic that’s going to occur. That is type of a tangent as a result of we’re speaking about 2025 predictions right here, however I do need to simply point out that this pattern will finish. We all know that beginning in 2022, that constructing increase that I used to be simply speaking about, fully stopped, pendulum swung a technique and we had a ton of constructing it, swung again all the best way the opposite method and now we have little or no constructing proper now. So meaning beginning in all probability within the second half of 2025, we’re going to haven’t a variety of flats coming on-line and we would have the alternative state of affairs as a result of the truth, the long-term view of that is that the US doesn’t have sufficient housing models, proper? We’re someplace between one and seven million housing models in need of what we want.

Dave:
And so we want all of those flats, however they’re simply all coming on-line at the very same time. And that’s creating type of this inefficiency available in the market that’s benefiting renters and tenants proper now and hurting the owner facet of issues. That can in all probability even out within the subsequent couple of years as soon as all of this new provide will get absorbed, in all probability near the top of 2025 or someplace round there. So simply to summarize this, I agree I wouldn’t depend on a variety of lease will increase over the subsequent 12 months, however the long-term forecast for lease development nonetheless stays constructive. In order that’s my tackle the lease forecast Developing after the break, I’m going to speak about how building regulation might change the market and I’ll do speedy fireplace reactions to 5 extra predictions that Redfin put out. We’ll be proper again.

Dave:
Welcome again to our response present the place we’re discussing Redfin’s 2025 housing market predictions. The fifth prediction that we’re going to speak about proper now reads fewer building rules will result in extra house constructing. Their clarification says we count on house builders to assemble extra single household properties in 2025. They’ll take a couple of years for the rise in house constructing to make shopping for a home considerably extra reasonably priced. The Republican sweep of the White Home Senate and Home has improved builder confidence by bringing renewed optimism that regulatory burdens could ease. Builders may also financial institution on the truth that the mortgage charge lock-in impact will put a lid on the quantity of present stock competing with new builds. Easing rules also needs to result in a rebound in multifamily housing begins. That might be a reversal from 2024 when builders pulled again on condominium begins due to the glut of provide.

Dave:
Okay, so do I agree with this concept that fewer building rules will result in extra house constructing? That is type of a sure and no. I agree with the sentiment right here. What they mentioned is that fewer building rules is increase builder confidence. Issues are wanting proper for extra building. And I do suppose that’s true. I believe that’s going to offer some upward stress on building begins. Principally that is going to provide builders some extra confidence and may assist. However I additionally need to point out that there’s possibly going to be some counter stress. There’s another variables within the housing market and the broader financial system that may damper a few of this impact of deregulation and that’s principally tariffs. And we talked about that earlier and once more, we don’t know precisely what it’s going to do in the event that they’re going to occur, how extreme they’re going to be.

Dave:
So I’m simply need to throw out one state of affairs that would occur. But when Trump implements tariffs to the tune of 40%, he mentioned not too long ago 40% for China, 20% for Mexico, issues like that. Most economists consider that if there are tariffs applied, it should create a one-time value enhance. It’ll be inflationary, however only for this one time when the tariffs are elevated, however these tariffs are prone to are available 25. So builders will really feel the influence of these tariffs within the subsequent 12 months. Now once more, I don’t know if that’s essentially going to occur. I simply need to present some context to this prediction that yeah, deregulation might and possibly will enhance builder confidence, however there are another issues that now we have to attend and see to know whether or not or not there’s truly going to be a big enhance in building. I hope that is proper as a result of we do want extra housing provide in the USA.

Dave:
We simply talked about that and I believe we do have to work on constructing our method out of this housing deficit that we’re in, however I simply need to mood folks’s expectations and simply present some counter narrative right here. Alright, so these are our first 5 predictions. Once more, we talked about house costs, we talked about mortgage charges, house gross sales, that renters could have the higher hand of the subsequent 12 months and what is going to occur with building with deregulation. Redfin has truly made 5 extra predictions and I’m simply going to speedy fireplace a few these final ones as a result of we don’t have time for all of them and I believe I can reply them fairly shortly. So prediction quantity six says, rich folks pays much less to purchase and promote properties as commissions decline barely. I truly agree with this. I do suppose there’s this downward pattern in commissions, however I don’t suppose it’s going to be as dramatic as lots of people suppose it’s going to take a while for all of this NAR fallout to work by way of the true property market.

Dave:
And so it’s possible that commissions will pattern down, however I believe it’s not going to be that dramatic. Redfin is mainly saying that rich individuals who have excessive worth listings or shopping for excessive worth properties will get pleasure from the good thing about decrease commissions most as a result of the commissions are going to be so massive that ages are going to be extra prepared to barter on these and that logic is smart to me. So I purchase into this one. Prediction quantity seven is the true property business will consolidate. They mentioned that below the brand new administration, the FTC might be extra prone to approve mergers and acquisitions among the many giant corporations, in contrast to different industries with a couple of dominant gamers, the US actual property business has lengthy been fragmented with a number of actual property search websites and brokerages, all of sizes enterprise fashions competing for brokers and clients. I agree with this.

Dave:
I don’t know if it’s coming this 12 months, however it does appear inevitable that actual property must consolidate. It’s actually fragmented. I agree with that. I don’t know if extra mergers and acquisitions is the factor that lastly offers that catalyst, and I don’t know if it occurs in 2025, however I do suppose consolidation is probably going, not less than within the subsequent couple of years. Prediction quantity eight reads, local weather threat might be priced into particular person properties, particularly in coastal Florida. The reason says the danger of pure disasters will begin pushing down house costs or slowing worth development in local weather dangerous locations like coastal Florida, wildfire inclined components of California and hurricane inclined components of Texas. General, I agree with this. I believe we’re already seeing this, so I don’t know if that is a lot of a ahead wanting factor, however we’re already beginning to see a variety of these market seen house worth declines.

Dave:
And I don’t essentially suppose it’s as a result of folks aren’t shifting there. Individuals are clearly shifting to Florida. Lots of people are shifting to Texas, however insurance coverage prices are so costly that it’s changing into unaffordable for the individuals who need to reside in these markets to reside there. And so one thing has to provide, and I’m fairly certain insurance coverage corporations usually are not going to provide. And so that’s placing stress on house sellers to decrease costs. I believe we’re already seeing this. So I agree with this normal prediction that this pattern goes to proceed. Prediction 9 Mayors in blue cities will assist reverse the flight from city facilities. This says San Francisco elected a pro-business democrat as its new mayor. This 12 months, Portland, Oregon elected a mayor who pledged to finish unsheltered homelessness and a number of other different massive cities in blue states are enacting robust on crime insurance policies to revive their downtowns and retain residents.

Dave:
So I believe typically that is too broad of a prediction to both agree or disagree with saying mayors in blue cities will trigger this shift in demographic tendencies, I believe is a bit a lot maybe in some cities with sure mayors, with sure insurance policies that may occur. However we’re seeing a variety of indicators that not simply in blue cities, that persons are shifting to the suburbs, persons are favoring extra suburban neighborhoods. And so I believe there’s an uphill battle right here in blue cities or pink cities to cease the flight from city facilities. And so I don’t know if that is going to occur in 2025. Final prediction quantity 10, gen Z will rewrite the American dream, chopping house possession from the script. This one is one thing I’m actually glad they talked about right here as a result of it’s one thing I’ve been enthusiastic about lots. Perhaps we’ll simply do a complete present on this sooner or later as a result of house possession has simply change into so unaffordable.

Dave:
And in case you consider what Redfin wrote right here and a number of the issues that I agree with Redfin on, it’s that house possession and affordability just isn’t going to get that a lot simpler within the subsequent couple of years. It would get just a little simpler subsequent 12 months and hopefully we’ll type of snowball and get simpler and simpler over the subsequent couple of years, however it does really feel proper now unlikely that we’re going again to a degree of affordability that we noticed within the 2010s or throughout Covid, and that has large implications for our whole society. Actually, house possession is such an necessary a part of the American dream of what Individuals contemplate success. What does it imply that fewer persons are possible to have the ability to afford properties? Is it, as Redfin mentioned that Gen Z goes to rewrite the American dream and possibly house possession is now not a part of that dream?

Dave:
I don’t know precisely what this implies, however I believe it’s a very necessary subject and factor to consider as an actual property investing business. And we’ll in all probability make a complete present about this subject of house possession within the close to future. So make certain to remain tuned for that. Alright, these are my reactions to Redfin’s 10 housing market predictions for 2025. I’m very curious to listen to in case you agree with Redfin. For those who agree with me, please make certain to let me know. For those who’re watching in YouTube, make certain to let me know within the feedback under or simply shoot me a message on BiggerPockets or on Instagram and let me know what you suppose goes to occur right here in 2025. Thanks all a lot for listening. We’ll see you subsequent time for the BiggerPockets podcast.