The 5 Biggest Factors Influencing the Housing Market in 2025

As we look ahead to 2025, many buyers and sellers are wondering: What’s next for the housing market? According to Zillow, home prices are expected to grow at a more moderate pace, with a projected 2.6% national increase and an estimated 4.3 million home sales—up from 4 million in 2024.

If you’re planning to buy or sell, understanding the key trends shaping the market can help you make informed decisions. Here are five major factors that will influence the housing market in 2025.

1️⃣ Interest Rates & Affordability

Mortgage rates play a huge role in home affordability, and experts predict they will stabilize in 2025 after recent fluctuations. Lower rates could encourage more buyers to enter the market, but even a slight increase could impact affordability.

🔹 What This Means for You: Buyers should keep an eye on interest rate changes and act when conditions are favorable. Sellers should be prepared for shifts in buyer demand based on rate trends.

2️⃣ Home Prices & Affordability Challenges

Even if interest rates drop, home prices are still expected to rise modestly due to ongoing supply-and-demand imbalances. While this is good news for homeowners building equity, it may continue to challenge first-time buyers.

🔹 What This Means for You: If you're buying, start preparing now—saving for a down payment and getting pre-approved can give you a competitive edge. If you're selling, you may still see strong demand, but pricing competitively will be key.

3️⃣ Inventory Levels & New Construction

One of the biggest challenges in recent years has been low housing inventory, and 2025 will be no exception. While some homeowners may be ready to sell, new construction projects and material supply chains will play a crucial role in determining available housing.

🔹 What This Means for You: With supply still tight, competition among buyers may continue. Sellers in high-demand areas may have an advantage, but pricing realistically will help attract motivated buyers.

4️⃣ Demand for Suburban & Secondary Markets

More buyers are looking outside major cities for affordability and a better quality of life, a trend that started during the pandemic. With hybrid work models still popular, suburban and secondary markets will likely see continued demand.

🔹 What This Means for You: If you're looking to buy in a secondary market, you may find more options at a better value. Sellers in these areas should highlight the benefits of space, lifestyle, and affordability to attract buyers.

5️⃣ Generational Shifts in the Market

Millennials—now the largest group of homebuyers—are entering their prime homebuying years, while baby boomers are downsizing or moving into retirement communities. These shifting generational trends will create movement on both sides of the market.

🔹 What This Means for You: Millennials looking for starter homes will drive demand, while boomers selling larger homes will influence inventory trends. Understanding these generational shifts can help buyers and sellers make strategic moves.

What’s the Best Strategy for 2025?

🏡 For Buyers: Stay informed, get pre-approved, and be ready to act when the right opportunity comes.
🏡 For Sellers: Market your home strategically, price competitively, and work with a real estate professional to navigate shifting trends.

The 2025 housing market will be shaped by these key factors—but no matter where the market goes, having a knowledgeable real estate agent by your side will make all the difference.

Thinking of buying or selling? Let’s connect and create a plan that works for you! 📩✨

This article originally appeared on GOBankingRates.com: Real Estate Agents: These 5 Factors Will Most Influence the Housing Market in 2025

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