The housing market is poised to be a mixed bag in 2025, with reduced interest rates, shifting demand and other economic and societal changes affecting the market, according to a new report from Clever. While there will be some improvements in the market for buyers and sellers alike, there will also be challenges.
Clever surveyed over 300 real estate agents to find out what they predict will be the biggest challenges for the housing market in 2025. Here’s a look at their top three predictions.
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The majority of real estate agents (56%) believe economic uncertainty will lead to challenges in the housing market in 2025.
“Economic uncertainty is a significant factor for the housing market in 2025, since so much of the strength of the past few years has been powered by strong buyer demand,” said Nick Pisano, data writer for Clever Real Estate. “That’s been strained by rising rates and home prices, and there’s no guarantee demand will stay high if the economy experiences a downturn.
“If unemployment increases, fewer potential homeowners will be in the financial position to buy, and those who are might be more cautious and stick with their current situation for a while longer.”
Economic uncertainty could lead to an overall slowdown for the real estate market as both buyers and sellers wait to see what happens before making any moves, Pisano said. However, it might benefit buyers.
“Prices could fall in some markets as nervous sellers — including investors and flippers — look to offload their homes before a potential recession,” Pisano said. “Buyers might see fewer properties if sellers are in ‘wait and see’ mode, but they might also find good deals they can take advantage of if they’re prepared.”
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The home affordability crisis is only likely to become worse in the coming year, with 54% of real estate agents predicting declining home affordability in 2025.
“It’s possible that homes become less affordable in the year ahead, even if the Federal Reserve continues to cut interest rates,” Pisano said. “[Declining rates] could unleash a flood of demand from new buyers who couldn’t afford homes at the old rates or current homeowners who were waiting for rates to decline before moving and giving up their current mortgage, which is often at rock-bottom levels. This extra competition could push up prices even further for those lucky enough to get their offer accepted.”
It’s not just home prices that could increase — Pisano also believes that insurance and property taxes will also become less affordable in 2025.
“Finally, new construction could also face increasing costs from proposed tariffs, which may affect the price of a wide variety of components used in new homes,” he added.
However, this doesn’t mean that prospective buyers should give up on the idea of buying a home in 2025.
“Buyers looking for an affordable home should go into the process with a flexible mindset,” Pisano said. “It’s crucial to distinguish between things you want and things that are true must-haves, as this can help expand your list of possible homes and improve your chances of scoring a deal.
“Are you most willing to compromise on location, square footage, interior features or another factor?” he continued. “Knowing this from the start can make it easier to spot a true deal as opposed to a cheap home you might regret later.”
Pisano also said that buyers with home improvement and DIY skills can save some money by opting for a fixer-upper, since these often have less demand compared to move-in ready properties.
Roughly half of the real estate agents surveyed (51%) believe that low housing inventory will be a challenge for the market in 2025.
“The number of new housing starts has been decreasing for several years now, and if demand stays high, prices will be pushed up as would-be buyers compete for a smaller number of available homes,” Pisano said. “Our research has previously found that just 15% of boomer homeowners plan to sell in the next five years, meaning there likely won’t be a massive influx of older homes for sale as boomers downsize, another sign inventory might remain low in many areas.”
Declining rates likely won’t be enough to shift into the buyers’ market many would-be buyers were hoping for in 2025. But, there are ways for homebuyers to be prepared for the challenging real estate market ahead.
“The most important thing buyers can do is to be prepared,” Pisano said. “Know your budget and must-haves for a home, and be ready to take quick action when you [find] a property that fits your needs.
“Having an experienced real estate agent is also critical to ensure you’re able to negotiate the best deal and avoid any potential pitfalls,” he continued. “Beyond this, the best advice is to prepare financially by saving for a sizable down payment and ensuring your credit score and income are as healthy as possible.”
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This article originally appeared on GOBankingRates.com: Real Estate Agents: 3 Biggest Challenges the Housing Market Will Face in 2025