Real estate investors like, Patrick Carroll, believe that the outlook for the real estate market in 2025 depends on several factors. These include mortgage interest rates, the Federal Reserve’s policy on short-term interest rates, and the cost of construction, which may be climbing because of the shortage of materials driven by 2024’s hurricanes. Here are some of his predictions for the real estate market in 2025:
Home prices
Carroll cites expert opinion that prices in general will go up while the rate of increase will go down. Goldman Sachs predicts that home prices will increase by 4.4% in 2025. Fannie Mae predicts that home price growth will slow to 3% year over year in 2025.
Mortgage rates
Some evidence suggests that mortgage rates could fall by 0.5% or more by the end of 2025.
Commercial real estate
Growth in commercial real estate in 2025 is likely to be slower than historical levels due to high borrowing costs and fears regarding wars abroad. However, some in the commercial real estate industry are optimistic about the outlook for 2025.
Buyers
Buyers with fewer resources for down payments, closing costs, and buyer broker compensation may be shut out from some inventory.
Sellers
Sellers may continue to offer compensation to buyer representatives to increase accessibility and boost demand for their homes.
Some homes, however, will soar in value in 2025. These include:
- Historic homes. Recent construction all looks the same, so some buyers will seek out historic homes of story and character. Older homes tend to be centrally located, also driving up the price.
- Multi-family rental units (duplexes, triplexes, 4-plexes, and apartment buildings). Home ownership is out of reach for many families, so now is the time to invest in the rental market. Look for walkable neighborhoods rich in amenities.
- Eco-friendly homes. Younger buyers insist on sustainable construction and sustainable homes. They don’t want just any older home, although many are drawn to the historic homes mentioned above, especially if they are in locations with a short commute.
- Mobile home spaces. Investors recommend investing in mobile home parks, not mobile homes. But as the stigma around mobile homes decreases, more and more first-time buyers will be seeking affordable homes in mobile homes that have to go somewhere.
- Turn-key condos. Fully furnished condos and apartments always appeal to professionals. You can always find a ready market for furnished condos with housekeeping service.
