After a challenging 2024 that saw the lowest transaction volume in 30 years, the real estate market shows promising signs of revival for 2025. While mortgage rates remain in the spotlight, experts predict a gradual easing to around 6% throughout the year, though volatility will likely continue.
The market is expected to become more active, with existing home sales projected to increase by 9% and new home sales by 11%. This uptick is driven by significant pent-up demand from life changes such as marriages, divorces, job relocations, and growing families. Home values are forecast to see modest growth of 2%, creating a more balanced market for both buyers and sellers.
The demographic landscape of homebuying has shifted dramatically. Today's buyers are older and more affluent than ever before, with the median age rising to 56 in 2024. First-time buyers now average 38 years old, reflecting the challenges younger generations face in entering the market. Notable trends include 26% of purchases being all-cash transactions and 17% being multi-generational homes.
Market dynamics vary significantly by region. Markets like San Francisco are expected to see price declines (-2.3%), while others like Austin predict minimal growth (0.4%). The buyer's market conditions currently seen in the South and Southeast are expected to spread to the Southwest, though this could change if mortgage rates fall more dramatically than expected.
A notable shift in housing preferences is emerging. The pandemic-era demand for larger spaces is waning, with buyers increasingly embracing smaller, more efficient homes. This trend is reflected in listing language, with the term "cozy" appearing 35% more frequently in 2024 compared to 2023, signaling a move away from open floor plans toward more contained, cost-effective spaces.
Looking ahead, while inventory is expected to improve in 2025, offering buyers more choices, the fundamental housing shortage remains a long-term challenge. With the U.S. population having grown by over 70 million since 1995, housing production hasn't kept pace with demand. However, with projected job gains of nearly 2 million in 2025, the market appears poised for a steady, if modest, recovery.
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