Housing Market Forecast 2024 & 2025: Predictions for Next 5 Years (2023)

Housing Market Predictions for Next 5 Years

The housing market is a crucial component of the US economy, and predicting its future trends and fluctuations can be difficult, especially as external factors can influence the market. Here's what some of the experts predict will happen in the housing market in the next five years. Some economists are more hopeful, but even those who predicted price increases through 2023 are changing their tune.

According to Freddie Mac's October forecast, the housing market is expected to experience a 0.2% price decrease in 2023, a significant change from the previous quarter's prediction of a 4% price increase. While some economists are optimistic, many experts are concerned about the red flags in the market as the Federal Reserve attempts to keep inflation under control.

One of the most noteworthy predictions for 2023 and beyond is that the real estate market in Atlanta will be the one to watch as 4.78 million existing homes are sold at stable prices. Lawrence Yun, Chief Economist and Senior Vice President of Research at the National Association of Realtors, predicts that the median home price in Atlanta will rise to $385,800, a minimal increase of only 0.3% from the previous year. However, home sales are expected to fall 6.8% compared to 2022's level.

Half of the country may witness price increases, while the other half will see price drops, with California's markets potentially experiencing price decreases of 10-15%. The foreclosure rate is expected to be lower than ever before, accounting for less than 1% of all mortgages, less than half the average historical rate of 2.5%. The GDP growth rate is predicted to be 1.3%, indicating a significant slowdown.

ALSO READ: Will There Be a Drop in Home Prices in 2023?

Associate Chief Economist at Redfin, Taylor Marr, predicts that mortgage rates are expected to fall further in 2023 as the Federal Reserve eases rate hikes, leading to an increase in demand for house purchases. However, demand is still below its high, so it's too early to declare a comeback or even a recovery. In 2023, the housing market could feel more like a buyer's market than a seller's market after being in a seller's market for several years.

Danielle Hale, the top economist at Realtor.com, predicts that the national annual median price for homes for sale is projected to rise by another 5.4%, which is less than half the pace seen in 2022. Although this increase in listings should be good news for buyers, it's mostly due to homes taking longer to sell due to tighter affordability. In 2023, the rate of home sales is expected to be down 14.1% compared to 2022.

Interim Lead of the Office of the Chief Economist at CoreLogic, Selma Hepp, predicts that real estate activity and consumer mood regarding the housing market will plummet if mortgage rates increase above 7%. In October, home price increases remained close to single digits, and this trend is expected to persist through the rest of the year and into 2023. However, more deteriorating inventory, some relief in mortgage rate rises, and reasonably optimistic economic data may help stabilize home values eventually.

Finally, a senior economist at Zillow, Jeff Tucker, suggests that the softening of the rental market has not yet resulted in significant relief for tenants. Rent increases have slowed from a record 17.2% in February to 8.4% in November. However, rental rates are still higher than they were before the outbreak, and tenants may need to be flexible and adaptable as they continue to navigate the market.

According to the data provided by Zillow, the US housing market is expected to remain stable in the coming months, with a slight increase in home prices predicted in certain regions. The data indicates that as of January 31, 2023, the housing market is expected to experience a decline of 0.1%. However, Zillow forecasts a recovery in the market by the end of 2023.

By February 28, 2023, the data predicts that there will be no further decline, and the market will stabilize. This stabilization is expected to continue through April 30, 2023, with no change in home prices expected. Moving forward to January 31, 2024, Zillow forecasts a growth of 0.5% in the US housing market, which is a positive sign for homeowners and investors.

It is important to note that these forecasts are for the entire country, and specific regions may experience different market conditions. Therefore, homeowners and buyers should consult with local real estate professionals to get a more accurate understanding of the housing market in their area. Overall, the data provided by Zillow suggests that the US housing market will remain stable and see moderate growth in the coming years. This is a positive sign for both buyers and sellers, as it provides a sense of stability and predictability in the market.

Zillow’s Bold Housing Market Predictions for 2023

Zillow's expertise in real estate and analysis of data makes them a trusted source for insights into the US housing market. By delving deeper into their predictions, readers can gain a more comprehensive understanding of the factors that may impact the housing market in the coming years.

As people look for new ways to overcome the housing affordability crisis, Midwestern markets will heat up, and more friends and family members will pool their money to buy homes together in 2023. That crisis, however, will stabilize – if not improve – from its pandemic-era apex. Rental units will be the focus of new construction, and we should see an increase in homeowners becoming first-time landlords. These are just a few of the new predictions made by the Zillow Economic Research team for 2023.

ALSO READ: Latest U.S. Housing Market Trends

National home values are still rising year-over-year, but at a much slower rate than the pandemic housing boom. Affordability constraints have triggered a power rebalancing in the housing market. Home sales are predicted to stay lower than in recent years – at least for the predictions for the next two years (2023 & 2024). Year-over-year home price growth slowed in 2022 as mortgage rates rose sharply, resulting in worsening housing affordability.

With mortgage rates still topping 6%, resulting in rapidly declining home purchase demand, home prices are expected to fall in 2023. Some housing markets are on the verge of a drop in home values within the next 12 months. Home prices are expected to dip over the next 12 to 18 months before stabilizing and then recovering, according to experts. Overall the predictions for the next five years are that home price appreciation is likely to range between 15 and 25%, but they will be uneven.

A drop in demand due to rising mortgage rates causes homes to stay on the market longer and slows price increases. Many would-be sellers are tied to low rates, making the switch to a more expensive mortgage difficult, and reducing inventories. This rebalancing gives wealthy purchasers more time to make decisions, less competition, and greater negotiation leverage than in recent years.

Homebuyers continued to be deterred by mortgage affordability problems, resulting in less competition and a larger supply of available houses. Since last year, the housing market has cooled dramatically, and homes are now staying on the market for much longer, whether they sell or not. As rates, and thus mortgage payments, stay high, many potential buyers are being priced out of the market, and affordability will likely not be on their side any time soon.

Housing Market Predictions for 2024 2025 2026

There is an abundance of speculation regarding the forecast of the housing market in 2023. However, what about the real estate forecasts for 2024, 2025, and so on? Although, it is quite difficult to forecast the housing market for the next five years here is an insight into what most experts predict can happen.

Mortgage rates are at their highest point in 20 years, which is having a chilling effect on the housing market and driving down prices. But as supply remains constrained, housing prices in many U.S. markets have not yet begun to level off. Some experts have predicted the future of the housing market over the next five years. Only an oversupply can cause a crash.

The housing shortfall will last another year, with supply eventually catching up with demand by five years. The seller's market will persist as long as home inventory stays low. By five years, it is predicted to become a balanced housing market in which neither buyer nor seller has a monopoly. Instead, negotiation power between parties will be more equal and will vary depending on the circumstances.

The US housing market continues to be a subject of mixed opinions, with economists and housing experts divided about the future direction of home prices in the coming year. Despite a record streak of 130 consecutive months of year-over-year price increases, the pace of YOY price increases has slowed compared to November, and month-over-month existing-home sales prices have continued their downward trend.

While mortgage rates are showing signs of ease, they are still at elevated levels compared to a year ago, and a lot will depend on how the economy performs in the face of high inflation, steep interest rates, ongoing geopolitical uncertainties, and recession fears. A major challenge for the housing market continues to be the shortage of housing inventory, which has remained stuck at near-historic lows since the 2008 housing crash and is unlikely to normalize in 2023.

Chief economist for the National Association of Realtors Lawrence Yun believes we are likely to see total price growth across the country of between 15% – 25% over the next five years. This forecast is likely to manifest as a decline in the coming year, a plateau in 2024, and then a period of relatively robust growth.

According to Greg McBride, the chief financial analyst at Bankrate, over the next five years, the US housing market is predicted to generate an average annual return in the mid to low single digits. In the long term, we are aware that real estate provides consistent returns above the rate of inflation. The longer the time frame, the more certain we can be about the general direction of travel, which has historically been upward in the real estate market.

According to Goldman Sachs, home prices in the United States will fall 5 to 10% over the next year. According to the same Goldman Sachs research, the housing market will bottom out in late 2023. Prices are projected to level off and remain relatively stable until mid-2024, so a turnaround is not anticipated to occur quickly.

The low housing inventory has propped up demand and sustained higher home prices, making it difficult for many homebuyers, especially first-time buyers, to access affordable housing. Despite the mixed signals in the housing market, some experts say that home shoppers have reason to be hopeful in 2023. According to Lawrence Yun, the chief economist at the National Association of Realtors (NAR), “Markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”

And with mortgage rates stabilizing near 6%, the NAR also expects the housing market to turn around in 2023 and rebound in 2024. However, the outlook for housing inventory remains gloomy, with industry experts predicting low inventory to continue to vex the housing market throughout 2023. With 70% of homeowners sitting on a mortgage rate of 4% or less, it is unlikely that we will see an influx of homes hitting the market soon.

In the homebuilding realm, there are mixed signals, with single-family construction starting up 11.3% in December, while applications for building permits declined by 6.5% from the previous month. Despite this, builder confidence has increased for the first time after 12 consecutive months of declines, reflecting some cautious optimism in the market.

In conclusion, the US housing market remains complex, with a multitude of factors affecting its future direction. However, despite the challenges, there is reason to be hopeful, with experts predicting that markets in half of the country will offer discounted prices to potential buyers, and with mortgage rates stabilizing near 6%, the housing market is expected to turn around in 2023 and rebound in 2024. That being said, the outlook for housing inventory remains bleak, with low inventory expected to continue to challenge the market throughout 2023.

Given the current trend of a steady rise in housing prices and limited housing supply, the housing market in 2024 is likely to see modest growth, rather than any substantial increase or decrease. Homebuyers who are able to access affordable housing will continue to find a challenging and competitive market, as a result of limited inventory and high demand. The gap between home prices and mortgage rates will also remain, although we may see a slight decline in home prices as the economy improves, and mortgage rates level out.

The lack of new home construction will continue to drive up demand for existing homes, which will sustain high prices, however, the modest growth rate of the economy may slow down the pace of price increases. However, any sudden changes in the economy or significant shifts in interest rates could significantly impact the housing market in 2024.

A possible increase in interest rates could lead to a decline in home prices, as the cost of borrowing becomes more expensive. On the other hand, a stable or declining interest rate environment could continue to boost the market, allowing homebuyers to afford higher-priced homes. One factor that may have an impact on the housing market in 2024 is the Federal Reserve's monetary policy, which has a significant impact on interest rates and mortgage rates.

If the Federal Reserve decides to raise interest rates, this will increase the cost of borrowing, leading to a decline in home prices and a slowdown in the housing market. Another factor to consider is the current state of the economy and any potential risks that may arise. A recession or financial crisis could significantly impact the housing market and result in a decline in home prices. Conversely, if the economy continues to recover and grows steadily, this could result in a strong housing market and a rise in home prices.

The housing market in 2024 will continue to be impacted by a number of factors, including mortgage rates, the economy, and housing supply. While it is difficult to predict the exact outcome, the current trends suggest that the housing market will continue to grow, although at a slower pace than in previous years. Homebuyers will continue to find a challenging and competitive market, as a result of limited inventory and high demand. However, any significant shifts in the economy, interest rates, or other economic indicators could impact the housing market, leading to a decline or an increase in home prices.

As for the housing market, there are a few factors that are expected to impact the industry in 2025. Firstly, demographic shifts, such as the aging of the baby boomer generation, may lead to an increase in the demand for senior housing and assisted living facilities. In addition, the continued growth of remote work and the COVID-19 pandemic may result in a higher demand for homes in suburban and rural areas, as more people look for more space and access to nature.

However, there are also several factors that may cause some challenges for the housing market in 2025. For example, affordability remains a concern for many potential home buyers, and rising prices, combined with a shortage of available homes, may make it more difficult for first-time buyers to enter the market. Additionally, there may be some uncertainty surrounding the economy and the labor market, which could impact consumer confidence and limit demand for housing.

Despite these challenges, many experts remain optimistic about the future of the housing market. For example, the continued growth of the U.S. economy and a low unemployment rate is expected to boost consumer confidence and support demand for housing. In addition, a growing population, coupled with a shortage of available housing, is likely to result in a continued increase in home prices in many markets across the country.

Overall, while there may be some challenges facing the housing market in 2025, it is likely to remain strong and vibrant, with continued demand for homes and sustained growth in the real estate industry.

The Zillow home price expectations survey found that the housing market is likely to become a buyer's market by 2023. The panel also predicts rent growth to outpace inflation during the next 12 months, as priced-out potential home buyers exert additional pressure on the rental market.

When will the housing market turn into a buyer's market, according to the panel?

• The majority of panelists (56%) forecast a big shift in favor of buyers within the next year (sometime in 2023).
• All 107 survey respondents project home price deceleration in 2023.
• The share of panelists who believe their long-term outlook might be too optimistic jumped up to 67% from 56% last quarter.
• Another 24% predicted that the housing market shift would come in 2024.
• 13% expect the market to favor home buyers in 2025.
• While just 8% expect that to happen by sometime in 2026 or sometime in the next five years.
• Metros in the South and Midwest are the least likely to see price declines over the next year.
• Vacation market areas are most likely to see price declines.
• Rent growth and inflation should outpace stocks and home price appreciation over the next year.

Housing Markets Which Are Predicted to See a Decline in Home Prices

Prospective buyers are finally seeing a calmer market after the frantic rush for real estate over the last two years. Those who can still afford to own a home are quickly regaining lost leverage, but the transition to a more balanced market is still in its early stages. Home buyers priced out of the market face additional challenges, as high and rising rents may reduce their ability to save for a down payment even further.

According to survey respondents, the inexpensive Midwest markets that are least likely to see home price declines over the next 12 months are Columbus, Indianapolis, and Minneapolis, with only 36% reporting that home price declines from current levels were likely over the next 12 months. A majority of panelists expect fast-growing Southern markets like Atlanta, Nashville, and Charlotte to keep their hot streak going, with 44% predicting declines.

Markets expected to cool the fastest — with 77% of respondents expecting declines — are those that experienced the most growth during the pandemic, such as Boise, Austin, and Raleigh. The panel expects suburban and exurban areas to retain their heat over the next 12 months, while vacation and urban areas are expected to see price declines.

Rent growth should remain strong in the short term as high home prices keep many would-be first-time buyers in the rental market. Over the next 12 months, rents are expected to grow more than inflation, stocks, and home values. The panelists predict an average of 5.4% rent growth throughout 2023 – lower than the 8.6% annual growth they expect to see by the end of this year, but still higher than what Zillow data show to be just under 4% annual growth in the years prior to the pandemic.

Real Estate Forecast Next 5 Years

According to some experts, the real estate forecast for the next 5 years shows that it will be a balanced market. Despite declining buyers' optimism that now is a good time to buy a house, the number of households interested in becoming homeowners remains high. This is especially true for younger homebuyers, who are likely first-time buyers and are struggling to save for a down payment as rents continue to reach record highs.

Simultaneously, seller expectations for larger down payments appear to be increasing, fueled by a still-competitive housing market and repeat buyers with relatively more available equity. The housing market is unlikely to shift from a seller's to a buyer's market anytime soon. Rising mortgage rates may take some of the steam out of the market, allowing inventory to rise slightly. It would also slow the rate of home price appreciation and reduce the possibility of a red-hot housing market resulting in an overheated market.

The supply of available homes is so low that even a significant drop in demand due to higher interest rates will not turn this into a buyer's real estate market, according to industry experts. Because there are not enough houses available to meet demand, home prices will continue to rise, but the combination of rising home prices and elevated mortgage rates means fewer people will be able to afford to buy.

There would still be continuous price appreciation, scarcity of inventory, and good demand. Some markets will experience lower appreciation rates than others, with the Sunbelt performing particularly well. Home prices do not appear to be decreasing, even in some of the country's most expensive markets, the tier-one markets.

According to CoreLogic, with gradually improving affordability and a more optimistic economic outlook than previously thought, the housing market may show resilience in 2023.The CoreLogic HPI Forecast indicates that home prices will decrease on a month-over-month basis by 0.1% from November to December 2022 and on a year-over-year basis by 2.8% from November 2022 to November 2023.

Year-over-year home price growth ended its 21-month streak of double-digit momentum in November, posting an 8.6% gain, the lowest rate of appreciation in exactly two years. Although 16 states bucked the national trend and saw annual double-digit increases, appreciation is decelerating in many popular housing markets across the country.

Southeastern states still led the country for price growth in November but also saw some of the most pronounced cooling. Similarly, relatively more expensive Western areas also posted substantial combined declines in recent months since spring’s peak. Nationwide, the recent price deceleration pushed November home values 2.5% below the spring 2022 peak. In 2023, home values will likely move even further from that high point, as CoreLogic expects price growth to begin recording negative year-over-year readings in the second quarter.

Nationally, home prices increased 8.6 % year over year in November. No states posted an annual decline in home prices. The states with the highest increases year over year were Florida (18%), South Carolina (13.9%), and Georgia (13.6%). Nationwide, the recent price deceleration pushed November home values 2.5% below the spring 2022 peak. In 2023, home values will likely move even further from that high point, as CoreLogic expects price growth to begin recording negative year-over-year readings in the second quarter.

The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that Bellingham, WA is at very high risk (70%-plus probability) of a decline in home prices over the next 12 months. Crestview-Fort Walton Beach-Destin, FL; Salem, OR; Merced, CA, and Urban Honolulu, HI are also at very high risk for price declines.

A worldwide research firm, Capital Economics, predicts that the U.S. house price rise will likely slow in 2023, not this year. In October, the firm revised its forecast from a 5% price decline to an 8% price decline. Moody’s Analytics also adjusted its insights in August, September, and October, estimating a steeper drop each month. The economic research firm now expects home prices to fall 10%, and that’s in a best-case-scenario. If a recession takes hold, prices could fall between 15% and 20%.

However, the firm does not forecast a spectacular “price decline” or a housing bubble bust similar to that of 2006, which precipitated the global financial crisis and the Great Recession. A 5 percent fall would definitely constitute a price decrease, but it would not cause home prices to spiral out of control. Remember that house prices have risen steadily for several years and surged significantly during the COVID-19 epidemic.

A price drop is noteworthy, but in the grand scheme of things, it is relatively little. Before the housing bubble of 2006, the U.S. housing market was primarily supported by exceedingly risky bank lending methods that produced a synthetic demand for housing, allowing those who could not afford to retain their homes to acquire them. According to analysts, today's market does not have the same circumstances.

According to analysts, today's market does not have the same circumstances. Capital Economic forecasts that mortgage rates would increase to 6.5 percent by 2023. According to Matthew Pointon, a senior property economist at Capital Economics, if home price growth follows our earlier predictions and declines to zero by mid-2023, mortgage payments would remain above their mid-2000s peak until mid-2023.

Where Will Home Prices Rise the Most in 2024?

Fortune magazine reached out to Moody’s Analytics to get access to its latest proprietary housing analysis, and according to it, home prices will increase by zero percent in 2023—a dramatic decrease from the 19.7 percent price growth the housing market experienced in the last 12 months. However, analysts anticipate that price changes will vary significantly between regions of the United States.

In its analysis, the financial intelligence firm calculated how home prices are likely to shift in 414 regional housing markets between the fourth quarter of 2022 and the fourth quarter of 2024. Among the nation’s 414 largest housing markets, Moody’s Analytics forecast model predicts that 210 markets are on the verge of seeing home prices decline over the coming two years and 204 markets are poised to see home prices rise over the coming two years.

These cities are expected to report the biggest rise in home prices in 2024:

1. Albany, Georgia (5.5 percent)
2. Casper, Wyoming (4.52 percent)
3. Columbus, Georgia (4.09 percent)
4. Rocky Mount, North Carolina (3.97 percent)
5. San Jose, California (3.83 percent)

References

• https://www.zillow.com/research/daily-market-pulse-26666/
• https://www.zillow.com/research/zillow-2022-hottest-markets-tampa-30413/
• https://www.zillow.com/research/zhpe-q3-2022-buyers-market-31481/
• https://www.zillow.com/research/zillow-home-value-and-sales-forecast-september-2022-31431/#
• https://fortune.com/2022/08/15/falling-home-prices-to-hit-these-housing-markets-in-2023-and-2024/
• https://www.capitaleconomics.com/publications/us-housing/us-housing-market-update/surge-in-mortgage-rates-makes-house-price-falls-likely/