As we look to close out the year, several outlets have been reporting housing market predictions for 2025. Starting with Redfin, which reports that pent-up demand will drive a modest increase in home sales. However, high mortgage rates and rising prices will keep homeownership unaffordable for many, leading more Americans to rent instead. Here are some additional key predictions:

• Home prices will rise by 4%, while mortgage rates remain near 7%, keeping affordability out of reach for many buyers.
• Rent prices will stay flat as wages increase, improving rental affordability. Due to the increased supply of new units, landlords will offer incentives.
• Existing home sales will increase 2-9%, driven by pent-up demand, though high costs will limit growth unless mortgage rates drop unexpectedly.
• Climate risks will lower home values in coastal Florida, driving some middle-income residents to leave while the luxury market remains strong.
• Gen Z will delay homeownership, opting to rent or live with family longer while building wealth through alternative investments.

Source: Redfin (December 2024)

Zillow predicts a more active housing market in 2025 with increased home sales, modest price growth, and improved rental affordability. Still, buyers should prepare for mortgage rate volatility and a shifting market dynamic. Here are some additional predictions:

• Home sales will rise slightly to 4.3 million, with home values growing at a slow pace of 2.6%, giving buyers more time and leverage in negotiations.
• Mortgage rates are expected to fluctuate throughout 2025, creating opportunities for refinancing during temporary dips.
• Buyers’ markets will spread from the Southeast to the Southwest as inventory loosens unless mortgage rates fall significantly and reignite competition.
• Demand for smaller, more affordable homes will grow as buyers favor sustainable, purpose-driven spaces, reversing the pandemic-era trend for larger properties.
• Due to multifamily construction, renters enjoy free rent or parking, but these incentives will diminish, particularly in the second half of 2025.

Realtor.com highlights key 2025 trends, predicting that mortgage rates will stabilize at 6.3% on average, with modest home price growth of 3.7%. Here are some additional highlights:

• Inventory levels will grow by 11.7% year-over-year as more homes hit the market, but mortgage rate lock-in will limit the pace of new listings early in 2025.
• As mortgage rates ease, existing home sales will rise 1.5% to 4.07 million, with pent-up demand driving activity, particularly during summer.
• Rental vacancy rates will increase due to continued multifamily construction, but median rents will remain relatively stable, improving affordability slightly for renters.

Source: Realtor.com (December 2024)

Finally, Selma Hepp of CoreLogic believes that the 2025 housing market will continue to face affordability challenges despite improving inventory and modest rate relief. Demand remains strong but constrained by volatile mortgage rates, persistent supply shortages, and economic uncertainty under the new administration. Further, mortgage rates will remain volatile but may ease slightly, offering limited affordability improvements amid rising home prices and high ownership costs.

House flipping

ATTOM Data Solutions reports on housing flipping, highlighting in its Q3 2024 U.S. Home Flipping Report that home flipping accounted for 7.2% of all home sales, consistent with historical trends. That said, profits for investors declined sharply. The average return on investment fell to 28.7%, down from 31.2% in the previous quarter, marking a reversal after six consecutive quarters of improvement. Gross profits on flipped homes dropped to around $70,000, down $5,000 quarter-over-quarter, highlighting the ongoing challenges flippers face amid rising carrying costs like renovations, mortgages, and taxes.

Source: ATTOM (December 2024)

Rob Barber, CEO for ATTOM, comments:

“Home flippers just can’t seem to shake the doldrums. After more than a year when things were getting better, they turned notably worse again over the Summer…One quarter’s worth of numbers isn’t enough to make any grand statements about another downturn. The next six months should speak more to that, especially amid an ongoing tight housing market that should work in their favor. But as interest rates remain double what they were a few years ago and inflation keeps raising renovation costs, investors continue to have a tough time making the kind of profits that would lure more into the game.”

The report also notes that home flipping rates declined in 62.8% of U.S. metro areas compared to the previous quarter but remained steady or slightly up annually, with the largest flipping activity concentrated in affordable Southern markets like Warner Robins, GA, and Memphis, TN. Profit margins fell sharply in over half of the analyzed metros, with typical gross returns below 30% in nearly 40% of areas. High-return markets were primarily lower-priced regions in the Northeast and South, such as Ocala, FL, and Pittsburgh, PA. At the same time, major metros like Austin, TX, and Honolulu, HI, saw some of the lowest returns.

Source: ATTOM (December 2024)

According to ATTOM Data Solutions, the top 10 counties with the highest home flipping profit include:

1. Queen Anne’s County, MD ($373,222 gross profit)
2. Wasatch County, UT ($351,250 gross profit)
3. Pitkin County, CO ($350,000 gross profit)
4. Kendall County, IL ($348,500 gross profit)
5. De Kalb County, IL ($299,500 gross profit) 
6. San Francisco County, CA ($299,000 gross profit)
7. Williamson County, TN ($296,085 gross profit) 
8. Butler County, PA ($282,400 gross profit)
9. Geauga County, OH ($280,125 gross profit)
10. San Mateo County, CA ($279,000 gross profit)