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How will the U.S. real estate industry develop during Trump’s second term?

The median sales price of a single-family home in the United States was $437,300 in October, up from $426,800 a month ago, according to the latest data from the U.S. Census.

Meanwhile, the average U.S. rental price in October was $1,619, essentially the same or up 0.2% year-over-year and down 0.6% from a month ago, according to online real estate brokerage Redfin.

While it's difficult to predict exactly how the housing market will play out in 2025, several economists offered their predictions for what the next year might hold in a new report from online real estate brokerage Redfin. Home sales are expected to increase in 2025, primarily due to pent-up demand. But some potential homebuyers will still be priced out of rising home prices, with loan-922">mortgage rates remaining near 7%. On the other hand, rental prices should remain unchanged while wages rise, thereby improving affordability for renters. Politicians on both sides of the aisle are promising to lower housing costs for working-class Americans and build more housing; hopefully this will happen in the next few years.

Prediction 1: House prices will increase by 4% in 2025

Economists expect the U.S. median home sales price to rise steadily in 2025 and end the year 4% higher than in 2024. Prices will rise at a similar pace to the second half of 2024, as not enough new inventory is expected to emerge to meet demand. Rising prices are one of the factors keeping home ownership out of reach for many Americans, leading some would-be homebuyers to rent instead.

Prediction 2: Mortgage rates will remain near 7%

Mortgage rates are likely to remain high at 6% in 2025, with average weekly rates fluctuating throughout the year but averaging around 6.8%. Investors expect that if President-elect Trump implements a significant portion of his proposed tax cuts and tariffs and the economy remains strong, the Federal Reserve will cut policy rates just twice in 2025, keeping mortgage rates high. Tariffs could stoke inflation, while enacting more tax cuts would increase the U.S. deficit, both of which would push mortgage rates higher. High mortgage rates are the second part of what makes home buying unaffordable.

Another scenario: If the economy weakens or tariffs and tax breaks are rolled back, mortgage rates could drop to as low as 6%. A presidential transition is unpredictable in any year, but this year is especially unpredictable.

Prediction 3: Home sales in 2025 will exceed 2024

Existing home sales are expected to increase next year, with annualized growth rates of between 4.1 million and 4.4 million units by 2025. This represents year-on-year growth of 2% to 9%. The range of sales on display this year is unusually broad because while high housing costs may deter some potential buyers, there is also considerable pent-up demand in the market. If sales increase only slightly, it will be because of high mortgage rates and low inventory as homeowners continue to hold on to their homes.

If mortgage rates fall more than expected, or if the recent burst of homebuying demand continues, sales could rise even more. Despite mortgage rates remaining around 7%, demand for home purchases increased significantly in the weeks following the November election. This is partly because buyers are waiting for uncertainty to pass before making big purchases, and partly because many are more financially confident in the promises of a Republican-led administration. Even before the election, data showed that rising mortgage rates were not deterring buyers as much as expected, possibly in part because many Americans have become accustomed to high mortgage rates. If the economy remains strong and enough people can afford high housing costs next year, that will boost sales.

Prediction 4: 2025 will be a rental market

Many Americans will continue to rent or become renters. While the cost of buying a home will increase, rental affordability will improve. U.S. median asking rents are expected to remain flat year-over-year in 2025. This will make rent more affordable for the average American because wages will rise.

There will also be more new rental homes coming to the market, with many apartments that builders started building during the pandemic apartment building boom coming to fruition. This would create more supply than demand, incentivizing landlords to offer deals such as free parking, a free month's rent, more amenities or a moratorium on rent increases to retain residents. With rents flat or even falling next year and home prices likely to rise as interest rates are likely to remain high, the affordability gap between renting and buying is likely to widen.

Prediction 5: Fewer building regulations will lead to more residential construction

Homebuilders are expected to build more single-family homes in 2025, although it will take several years for the increase in residential construction to make buying a home more affordable. Sweeping Republican victories in the White House, Senate and House of Representatives have brought renewed optimism that regulatory burdens may be reduced, boosting confidence among builders. Builders will also be banking on the fact that the mortgage rate lock-in effect will limit the amount of existing inventory competing with new construction.

Easing regulations should also lead to a rebound in multifamily housing starts. That would be a reversal from 2024, when builders cut apartment starts due to oversupply.

It’s important to note that builders face some headwinds. First, interest rates are likely to remain high. Second, the incoming administration has said it will cut immigration, which could lead to a reduction in residential construction since immigrants make up about 30% of the country's construction workforce.

Prediction 6: It will cost the rich less to buy and sell homes as commissions drop slightly

Real estate commissions are expected to decline slightly during the first full year of the National Association of Realtors' (NAR) new commission rules. This is especially true for luxury homes, where agents have the greatest scope to lower fees, which are increasingly a negotiating point in bidding wars in a competitive real estate market. It remains to be seen to what extent antitrust enforcers in the incoming administration will push for further reforms in the real estate industry. The Justice Department said in a recent filing that it "continues to review policies and practices in the residential real estate industry that may inhibit competition," but it was unclear whether it would take any formal action.

Prediction 7: The real estate industry will consolidate

Under the new administration, the Federal Trade Commission will be more likely to approve mergers between large companies. Unlike other industries where there are just a few dominant players, the U.S. real estate industry has long been fragmented, with multiple real estate search sites and brokerage firms of all sizes and business models vying for agents and clients. While it's not uncommon for large brokerage firms to offer affiliated mortgage or title services, we may see more brokerage firms, lenders and title companies merge in hopes of getting more business from each client.

Prediction 8: Climate risks will affect individual homes, especially along Florida’s coast

The risk of natural disasters will begin to depress home prices or slow price growth in climate-risk areas, such as coastal Florida, wildfire-prone areas of California and hurricane-prone areas of Texas. Homebuyers and their agents will inevitably become more aware of the risks associated with each property. More homebuyers will move to relatively affordable places in the Midwest and Northeast that are relatively protected from climate-driven disasters.

For many low- and moderate-income Florida homeowners, Hurricane Helen and Hurricane Milton were a turning point. This fall, more homebuyers are looking to leave Florida than a year ago, while fewer out-of-town buyers are looking to move into the state. The trend is expected to translate into some Floridians moving away from the state's coast after growing tired of living with devastating hurricanes, and housing costs rising even as home prices fall as insurance premiums, management fees and property taxes soar. Coastal Florida could become a place where only the wealthy who can pay sky-high insurance premiums or have the cash to rebuild can live. The luxury market along Florida's coast is expected to remain strong.

Prediction 9: Blue city mayors will help reverse the trend of people fleeing urban centers

San Francisco elected a pro-business Democrat as its new mayor this year, Portland, Ore., elected a mayor committed to ending homelessness, and several other big cities in blue states are enacting crackdowns Crime policies to revitalize downtown and retain residents. These political factors, coupled with many large companies, including technology companies, bringing workers back to offices, could lead to an exodus from large coastal cities.

This is expected to be especially true in California. Many Golden State residents will be motivated to stay as housing supply will continue to improve, keeping price increases in check; specifically, the ADU construction boom in places like Los Angeles and the Bay Area should continue to provide more housing. Additionally, chasing housing affordability in the desert no longer makes sense as home prices rise in places like Phoenix and Las Vegas while the climate gets hotter. Self-driving cars will start to become more common under the new administration, and more areas of California will become more livable. As self-driving ride-hailing apps and buses gain approval, urban areas such as downtown San Francisco and Los Angeles will become more attractive, while exurban areas will become more attractive as personal autonomous vehicles improve commuting.

Prediction 10: Gen Z will rewrite the American dream, knocking homeownership out of the playbook

Lower-priced housing is expected to boom in 2025 compared to higher-priced housing, but not because young or working-class Americans start owning homes. Instead, affordable homes will be snapped up by older buyers as they outgrow higher price levels. Meanwhile, Gen Z will continue to live with family or rent into their 30s and choose to build wealth in other ways.


About writer

John is a dedicated developer specializing in creating online mortgage calculators. With a passion for finance and technology, he has designed user-friendly tools that help individuals and families navigate the complex world of home financing. By leveraging his extensive programming skills and deep understanding of mortgage lending, John has crafted intuitive interfaces that allow users to quickly and easily estimate their monthly mortgage payments, understand the impact of different interest rates, and assess various loan terms. His mortgage calculators are not only accurate but also accessible, catering to a wide range of borrowers with diverse financial needs. John's commitment to providing transparent and reliable resources has made him a valuable asset in the realm of online financial tools.
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