With a new year comes the hope of a brighter tomorrow—should the real estate industry be pining for a bright 2025? Bright MLS has published a forecast projecting that the answer is very different depending on which housing market you’re observing.
RISMedia also spoke with the report’s author, Bright MLS Chief Economist Dr. Lisa Sturtevant, for greater insights into her projections.
The forecast accounts for both historical trends (tracked via data from the National Association of REALTORS®, Freddie Mac and the U.S. Bureau of Labor Statistics) as well as ongoing economic and demographic data.
The cumulative projection, as described by Sturtevant, is that “2025 is going to be a story of two markets.” Higher-income metro areas, such as Boston, New York City, Washington, D.C., will experience the highest price growth, while lower-priced markets are the ones most at risk from elevated rates and unaffordability. Moderate income buyers could continue to be priced out of high price growth markets as well.
Asked if this dichotomy will make for a sustainable market, Sturtevant said “at some point there has to be an affordability ceiling in some of these high cost metro areas,” but said that that ceiling probably won’t be reached in 2025. More advantaged buyers—repeat buyers, older buyers who’ve cashed in on equity, younger buyers receiving parental assistance—will have the advantage going into 2025, and will “continue to put upward pressure on these higher cost markets.”
Inventory, price and rate growth in 2025
Bright projects an average of 6.4% mortgage rates—rates are expected to continue to sit above 6% throughout the year and reach 6.25% by Q4 2025.
Existing-home sales are projected to increase 7.5% year-over-year (up to 4.4 million), with a 3.1% price increase up to $418,930.
Inventory is projected to increase 12.5%, resulting in 1.32 million listings by the end of the year. Increased inventory would put downward pressure on home prices, but while inventory is expected to grow, the rate of growth is forecasted to slow due to a slowing of new construction.
Sturtevant noted the accepted inventory barometer (a measure of year-end inventory) is “weird,” as it does not quite account for how active sales take homes off the market throughout the year.
“The reason why inventory will (appear to be growing more slowly) is simply because there will be more buyers out there taking properties off the market in 2025. So that’s actually consistent, right? More home sales,” Sturtevant explains. “Next year, inventory will be on the rise, but those homes will be coming off the market a little bit more quickly so that by the end of the year, it’ll look like inventory did not increase by as much as we should forecast.”
Markets at risk of slow price growth—alongside ones with high inventory gains such as Denver, Orlando, Miami—include ones with declining employment (Detroit, Minneapolis, etc.), or with existing high price growth (Tampa, San Antonio) and/or median prices (San Diego).
The X factor for mortgage rates will, of course, be inflation. The latest Consumer Price Index (CPI) saw inflation increase slightly, reversing course when the Federal Reserve’s goal of 2% inflation was on the horizon. Sturtevant notes that the upcoming CPI will signal if this reversal was a blip or a trend and that, going into 2025, many of President Donald Trump’s proposed policies (tariffs, deportation cutting into the labor supply, etc.) are inflationary. The labor market’s strength will also tilt inflation more toward an increase or decrease.
“If the labor market starts to weaken, then that will put the opposite pressure on inflation,” she says. “So if I had a crystal ball, I’d be in good shape, but there’s just a lot of competing factors out there right now.”
Read the full Bright MLS forecast here.
