‘Tug-of-war’ conditions could hinder a 2025 housing market recovery
The good news is that there are plenty of reasons to think 2025 will be a better year for the housing market. The bad news is there’s too much macroeconomic and political uncertainty to be sure.
That’s according to Bright MLS, which is the latest company in the real estate industry to issue a 2025 housing market forecast. Despite all that’s up in the air, Bright expects existing-home sales to rise 7.5% to 4.4 million, a projection that’s squarely in line with other industry forecasts.
“There will be competing pressures in 2025, creating a tug-of-war that could impact the housing market in surprising ways,” Bright MLS chief economist Lisa Sturtevant said in a statement. “There is significant pent-up demand and pent-up supply in the housing market, which could be unleashed in the new year. However, there is also economic uncertainty and political unpredictability that could restrain home sales activity.”
Bright’s forecast is underpinned by the expectation that mortgage rates will fluctuate but average 6.4%. It projects home prices to rise by 3.1% and inventory to increase by 12.5%.
HousingWire’s 2025 market forecast — produced by Lead Analyst Logan Mohtashami and Altos Research founder Mike Simonsen — has similar expectations as Bright’s. It calls for existing-home sales to hit 4.2 million and for prices to increase 3.5%, only slightly higher than Bright’s number.
In one possible timeline for 2025, home buyers and sellers would give up hope for lower mortgage rates and choose to enter the market, thus unlocking demand that would help push the housing market toward recovery.
But the prospects of that timeline being realized were clouded with the election of Donald Trump in November. Economists believe his proposals on tariffs and the mass deportation of undocumented immigrants have the potential to harm the macroeconomic environment for housing if he follows through with his promises.
His proposal of a 25% tariff on Canadian goods would likely increase the cost of lumber and thus make it more expensive to build homes. Mass deportations could also zap the construction labor supply, which could also raise sticker prices for new homes, which have been a bright spot for the housing market in 2024.
Trump’s broader proposal on tariffs — which includes a 25% import tax on Mexico, an additional 10% on China and 100% on so-called “BRIC” nations — are widely projected to increase inflation. This would jeopardize the Federal Reserve‘s efforts to cut interest rates and provide a roadblock to the late-year momentum in existing home sales.
Other companies in real estate that have published 2025 housing market forecasts include the Mortgage Bankers Association, Fannie Mae and the National Association of Realtors.