Thought Leadership with Claudia Stallings: 2025 Housing Forecast

It’s the season when real estate pundits across the country submit their bold predictions for the year to come. And the forecasts showing in their individual crystal balls are not necessarily all the same. For instance, HousingWire Research says the number of homes sold in 2025 will grow by five percent, while the National Association of Realtors is predicting a more robust nine percent increase. Another real estate news source, RISMedia has an increase of 1.5 percent in their forecast. Politics plays a large role in the availability of mortgage money, interest rates, and consumer confidence, and that’s in a state of upheaval. So, it’s proving to be difficult to predict what will happen in 2025.

East Tennessee has a multi-year history of outperforming the national predictions. If we look at a number somewhere in the middle of all those national predictions, perhaps we’ll settle in at an increase of about five percent or so. A few things must happen before we get moving forward into 2025, as 2024 sales underperformed when compared to the predictions that were made this time last year.

In 2024, we got stuck in the presidential election mire. Interest rates remained higher than people preferred, and we are still in the grips of the “lock in” effect, where homeowners with very low mortgage rates decided that keeping a low rate was more attractive than moving. We are on the back side of record price appreciation, so homes became very quickly unattainable by many buyers, most notably the younger generation of buyers seeking their first property, and that demographic is having to take more time to prepare themselves financially for a purchase.

Most all the national analysts predict that home sale prices will continue to increase, but at a slower pace than in more recent years. This means that investors may not be as interested in scooping up homes, as it will take longer for them to realize a significant gain. It also means that the ability to afford a home continues to elude many buyers.

But on the other side of the coin, there is the prediction that more homes will be on the market, and they will be on the market for a longer period of time. This may give buyers enough hope that a home that makes sense for them will be available, and it may draw them into the market. Interest rates are not predicted to move very much. All of this is to say, it may be a year where the market starts to see balance between available properties and buyers who want and can afford them.

Housing is still predicted to be a good, solid investment, and there are hundreds of thousands of homeowners who are sitting on an equity amount like they’ve never had before. And none of this is bad, it’s just different than where we’ve been recently.

*This article was reprinted with permission from the Knoxville News Sentinel in 2024.