Housing Market Forecast 2024 & 2025

In the next five years, here’s what some experts predict will happen in the housing market. Zillow reports that the average value of a home in the United States is $355,852. Based on seasonally adjusted data, this value is calculated for only the middle tier of home prices. Typical home values in July 2021 were $300,000. Home values in the United States have risen 18.2% over the past year and are expected to continue rising slowly.

 

Housing market forecasts were revised by Zillow Group in August 2022. For the twelve months ending July 2023, the real estate group predicts that home value growth will slow from the current rate of 16% to 2.4% based on the raw Zillow Home Value Index. As compared to last month’s forecast of 6.9% appreciation through June 2023, this is a significant change.

 

In July, the median home value in the country fell 0.1% from June, the first monthly decline since 2012. Monthly growth from April’s peak of 1.9% has slowed from July’s 0.1% fall. As part of its forecast, they now incorporate the percentage of for-sale listings that receive price cuts. The share of sellers has increased as a result of changing market conditions. In addition, weaker home sales forecasts contribute to lower home value estimates.

 

As well as recent market changes and continuing weakness in leading indicators of the metric, the forecast for 5.3 million existing home sales in 2022 reflects a 14.1% drop from 2021. The number of home sales declined faster than expected in June, while mortgage applications and pending home sales were weaker than expected in July.

 

Slow house sales are typically caused by a weak consumer mood. A slowdown in the economy would also reduce house purchases if interest rates rise quickly. The latest economic data sent mixed signals, which are factored into forecasts. In July, job growth and unemployment rates exceeded expectations.

 

The number of existing homes sold in July dropped to the lowest rate (SAAR) for the last two years. Homeowners are rarely selling and giving up their low rates, which contributes to the decline. Because of this, home sales are falling further from the 2021 peak, causing inventory to build and home prices to fall.

 

With decreasing competition and more sellers cutting their prices, bidding wars are fading. There won’t be any improvement for those priced out anytime soon. Price declines should bring demand back into the market, as inventory levels stabilize much lower than they were before the pandemic.

 

In terms of inventory and first-time buyer purchases, the Zillow home price expectations survey found that the housing market is likely to return to pre-pandemic levels by 2024. In the last two years, home values have grown by 32 percent as a result of a shrinking supply of homes. A major contributing factor has been the diminishing supply of properties.

 

Inventory decreased from 1,6 million units per month in 2018 and 2019 to just over 1 million in 2021 and will continue to decline in 2022.  Most respondents (38 percent) to Zillow’s study think housing market inventory will rebound to 1.5 million units or higher in 2024. The second-largest proportion of respondents (36 percent) predicts that supply will increase again in 2023 and the third-largest percentage (12 percent) believes it will occur in 2025.

 

The pandemic caused record-breaking price increases and rent increases, making saving for down payments difficult. In 2021, the percentage of first-time home buyers fell from 45 percent in 2019 to 37 percent, according to a Zillow survey. In the next two years, first-time buyers will regain their pre-pandemic market share, with 26 percent predicting 2024 and 25 percent predicting 2025.

 

Millennials, the largest generation in American history who will be well into their prime home-buying years far before 2030, predict first-time buyers will not reach 45% until after 2030. U.S. buyers are on average 43 years old, but the median (43 years old) is higher (45 years old). One in five buyers (17%) is in their twenties or younger, while a quarter (23%) is in their sixties or older. In other words, the age distribution of buyers in the U.S. represents a sort of middle ground.

 

The average tenured homeowner (one who hasn’t moved in a year) is typically younger, while the average renter is older. Household incomes of buyers tend to be higher than those of the general U.S. population. Median household income among buyers is approximately $86,000, compared to $65,700 for the overall national median (2019).

 

According to another Zillow Home Price Expectations survey conducted in June, although mortgage rates have increased by more than 100 basis points since the previous survey three months ago, and rates may rise further in the coming months, the panel’s predictions for home price appreciation in 2022 have risen from 9.0% to 9.3%. The 19.6% appreciation observed over the 2021 calendar year is a significant step down, but it remains well above long-term historical averages.

 

From now until the end of 2026, respondents who were most optimistic predicted a 46.1 percent increase in prices, while those who were most conservative predicted a 9.3 percent increase. It is expected that the total increase by 2026 will be 26.4 percent.

 

Real estate forecasts for the next five years are robust due to the expectation that tight market conditions will persist, with home demand exceeding supply. Households are still interested in becoming homeowners despite declining optimism about the housing market. As rents continue to rise, it becomes even more challenging for younger homebuyers to save for a down payment.

 

A still-competitive housing market, coupled with repeat buyers who have relatively more equity available, appears to be causing sellers to expect larger down payments. It is unlikely that the housing market will turn from a seller’s to a buyer’s market anytime soon. In the event of rising mortgage rates, the market might lose some steam, allowing inventory to rise slightly. Additionally, it would slow the rate of home price appreciation and reduce the possibility of an overheated housing market.

 

Experts say that even a significant drop in demand due to higher interest rates would not make this a buyer’s market. Home prices will continue to rise if there aren’t enough houses available to meet demand, but people will be less able to afford home ownership because of rising home prices and high mortgage rates.

 

Prices would still rise continuously, inventory would be scarce, and demand would be high. In some markets, appreciation rates will be lower than others, with the Sunbelt performing particularly well. Even in the most expensive markets of the country, the tier one markets, home prices do not appear to be decreasing. In February, CoreLogic reported that these large cities continued to see price increases, with Phoenix at the top with a 30.4% increase year over year. Las Vegas ranked second with 26.5% year-over-year price growth, followed by San Diego (25.2%).

 

A worldwide research firm, Capital Economics, predicts that the U.S. house price rise will likely slow after mortgage rates reach 6 percent in 2023. In mid-2023, Capital Economics forecasts that house prices will decline by 5 percent, followed by a “gradual rebound” to 3 percent price increases by the end of 2024. This major analysis comes as the U.S. housing market is shifting, with rising mortgage rates discouraging or pricing out potential buyers.

 

The firm does not predict widespread “price declines” or a housing bubble burst such as those that caused the global financial crisis and Great Recession of 2006. While a 5 percent drop would definitely be considered a price decrease, it would not lead to a spiraling price decline. In recent years, house prices have steadily increased, but during the COVID-19 epidemic, they surged significantly.

 

Price drops are notable, but in the grand scheme of things, they are relatively insignificant. In the years leading up to the 2006 housing bubble, the U.S. housing market was primarily supported by excessively risky bank lending methods that produced a synthetic demand for housing, allowing those who could not afford to hold on to their homes, to purchase them. As analysts point out, today’s market is different.

 

The current market does not have the same circumstances, according to analysts. It is forecast that mortgage rates will increase to 6.5 percent by 2023, according to Capital Economic. If home price growth follows our earlier predictions and declines to zero by mid-2023, mortgage payments will remain above their mid-2000s peak until then, according to Matthew Pointon, a senior property economist at Capital Economics.

 

 

According to Moody’s Analytics, home prices will increase by zero percent in 2023, a dramatic decrease from the 19.7 percent price growth the housing market experienced over the past year. Fortune magazine contacted Moody’s Analytics for a copy of its latest proprietary housing analysis. Analysts anticipate that price changes will vary significantly between regions of the country.

 

Between the fourth quarter of 2022 and the fourth quarter of 2024, financial intelligence firm calculated how home prices will shift in 414 regional housing markets. Based on Moody’s Analytics’ forecast model, 210 of the nation’s 414 largest housing markets will see home prices decline in the next two years, while 204 will see them rise.