As we move into 2025, the U.S. housing market continues to be a focal point of economic discussions. While affordability challenges remain a concern, home prices are expected to rise modestly next year. According to ResiClub's roundup of 16 major housing market forecasts, the average national home price increase is projected to be +3.5% in 2025. Let’s break down the data and explore the key trends shaping these predictions.

2024 Recap: A Steady Year for Home Prices

Despite affordability concerns stemming from high mortgage rates, home prices in 2024 grew at a low single-digit rate, aligning with historical norms. ResiClub estimates that national home prices increased by +2.0% to +4.0% in 2024, supported by limited inventory and resilient demand. These factors are setting the stage for continued growth in 2025.

National Averages vs. Local Variations

While national home prices are expected to rise, regional and local markets will see significant variation:

• Syracuse, NY: Home prices rose by +9.6% year-over-year.

• Punta Gorda, FL: Prices declined by -7.3% over the same period.

These disparities highlight the importance of understanding local market conditions when buying or selling real estate.

2025 Home Price Forecasts: Key Predictions

Most Optimistic Projections

1. Apollo Global Management: Predicts a +10.8% increase, citing low inventory, strong wage growth, and solid cash flows from fixed-income investments.

2. AEI Housing Center: Expects +5.5% growth, supported by a strong sellers’ market, low unemployment, and high borrower creditworthiness.

Moderate Growth Expectations

• Wells Fargo: Projects a +4.9% increase in 2025, followed by +5.2% in 2026.

• Fannie Mae: Predicts a +3.6% increase, with a smaller +1.7% rise in 2026.

• Zillow: Forecasts a +2.9% rise, emphasizing low inventory as a key driver.

Conservative Predictions

• CoreLogic: Estimates a +2.3% increase, with affordability challenges tempering growth.

• Freddie Mac: Sees a modest +0.6% rise, supported by homeowner wealth gains and demographic-driven sales.

The Outlier

• Moody’s: Projects a -0.4% decline, followed by a +0.7% rebound in 2026. Moody’s expects increased housing supply to outweigh demand, putting downward pressure on prices in certain areas.

Why Are Prices Expected to Rise?

Several factors contribute to the projected price increases in 2025:

1. Limited Inventory: A persistent shortage of homes for sale continues to prop up prices.

2. Demographic Trends: Baby Boomers staying in their homes and Millennials entering their peak homebuying years are driving demand.

3. Easing Mortgage Rates: While rates remain high, potential reductions in 2025 could boost buyer activity.

4. Economic Stability: Low unemployment and solid wage growth provide a foundation for steady demand.

Regional Hotspots and Cooling Markets

• Northeast Resilience: Markets in the Northeast, such as Providence, RI, and Boston, MA, are expected to remain strong due to stable demand and limited new construction.

• Sun Belt Slowdown: Cities like Tampa, Orlando, and Austin may experience slower growth or slight declines due to higher inventory levels and reduced migration trends.

What This Means for Buyers and Sellers

Buyers:

• Expect Modest Price Increases: While prices are rising, the growth is expected to be moderate, offering opportunities for buyers to find deals in cooling markets.

• Monitor Mortgage Rates: Keep an eye on rate trends, as even small reductions can improve affordability significantly.

• Focus on Local Markets: National averages don’t tell the full story—look at trends in your target area.

Sellers:

• Leverage Low Inventory: Limited supply means sellers are still in a strong position, particularly in desirable markets.

• Highlight Key Features: Homes with energy efficiency upgrades or flexible spaces for remote work will continue to attract buyers.

• Price Strategically: Use local market data to set a competitive price that aligns with current demand.

The Big Picture

Among the 16 forecast models tracked by ResiClub, 15 predict home prices will rise in 2025, with an average projected increase of +3.5%. While affordability challenges remain a concern, a combination of low inventory, economic stability, and demographic factors are expected to support steady growth.

As we move into 2025, understanding local market dynamics will be critical. Whether you’re buying or selling, working with a knowledgeable real estate professional can help you navigate the complexities of this evolving market.

Let’s connect to discuss how these trends may impact your real estate goals in Rhode Island and beyond.