Personal Finance
Here’s what to watch out for in the 2025 housing market
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Housing is not cheap — whether you’re buying or renting.
In October, the median sales price for a single-family home in the U.S. was $437,300, up from $426,800 a month prior, according to the latest data by the U.S. Census.
Meanwhile, the median rent price in the U.S. was $1,619 in October, roughly flat or up 0.2% from a year ago and down 0.6% from a month prior, according to Redfin, an online real estate brokerage firm.
While it can be difficult to exactly pinpoint how the housing market is going to play out in 2025, several economists lay out predictions of what’s likely to happen next year in a new report by Redfin, an online real estate brokerage firm.
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“If the housing market were going to crash, it would have already crashed by now,” said Daryl Fairweather, chief economist at Redfin. “The housing market has been so resilient to interest rates going up as high as they have.”
Here are five housing market predictions for 2025, according to Fairweather and other economists.
Home price growth will return to pre-pandemic levels
The median asking price for a home in the U.S. will likely rise 4% over the course of 2025, a pace similar to that of the second half of this year, according to Redfin.
The 4% annual pace is a “normalization” compared to the accelerated growth last seen in 2020, said Fairweather.
Earlier in 2024, the rate at which home prices grew slowed down to pre-pandemic levels. In other words, while prices were still rising, the speed of price growth was not as fast as it was in previous years.
Despite predictions of growth slowing, there may still be some volatility in prices.
In fact, home price appreciation might stay flat, or less than 1%, going into the 2025 spring home buying season, said Selma Hepp, economist at CoreLogic.
But the possibility of President-elect Donald Trump enacting some of his economic policies could drive home prices much higher, said Jacob Channel, senior economist at LendingTree.
“We kind of have some mixed signals right now in terms of what may or may not happen to home prices,” he said.
General tariffs on foreign goods and materials as well as mass deportations could result in higher construction costs and slower home-building activity. If fewer homes are built in a supply-constrained market, prices might grow much higher, said Channel.
Flattening rents, with more room to negotiate
At a national level, the median asking rent price in the U.S. will likely stay flat over the course of a year in 2025, as new rental inventory becomes available, according to Redfin.
“If rents are flat, and people’s wages continue to grow, that means people have more money to spend,” Redfin’s Fairweather said, as well as increase their savings.
More than 21 million renter households are “cost-burdened,” meaning they spent more than 30% of their income on housing costs, according to 2023 U.S. Census data.
A stable rental market will also give renters more strength to negotiate with landlords. In some areas, property managers are already offering concessions like one month rent free, a free parking space or waiving fees, experts say.
However, “it’s December,” Channel said. “Rent prices typically decline in the colder months of the year,” as fewer people are apartment hunting in the late fall and winter seasons.
If would-be buyers continue to be priced out of the for-sale market next year through high home prices and mortgage rates, competition in the rental market may ensue, he said.
Also keep in mind that the typical rent price you see will depend on what’s going on in your local market, Hepp explained.
For instance: Austin, Texas was the “epicenter of multi-family construction,” she said, meaning a lot of new supply was added into the city’s rental market, bringing rental costs down. The metro area’s rent prices fell by 2.9% from a year ago, CoreLogic found.
In contrast, supply-constrained metropolitan areas like Seattle, Washington, D.C., and New York City, are experiencing high rent growth of 5% annually.
A ‘bumpy’ and ‘volatile’ year for mortgage rates
Redfin forecasts mortgage rates will average 6.8% in 2025, and hover around the low-6% range if the economy continues to slow.
Yet experts expect 2025 will be a “bumpy” and “volatile” year for mortgage rates.
Borrowing costs for home loans could spike if policies like tax cuts and tariffs are enacted, putting upward pressure on inflation.
“We’re sort of in uncharted territory. It’s really tough to say exactly what’s going to happen,” said LendingTree’s Channel.
Mortgage rates declined this fall in anticipation of the first interest rate cut since March 2020. But then borrowing costs jumped again in November as the bond market reacted to Donald Trump’s election win. Since then, mortgage rates have somewhat stabilized — for now.
“Our expectation is that rates are going to be in the 6% range as we move into 2025,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, recently told CNBC.
More home sales than in 2024
Pent-up demand from buyers and sellers on the sidelines may drive home transactions next year.
“People have waited long enough,” Fairweather said.
About 4 million homes are expected to be sold by the end of 2025, an annual increase between 2% and 9% from 2024, according to Redfin.
The market is piling on with “people who need to move on with their lives,” like buyers who are getting new jobs and need homes suitable for life changes, and sellers who have delayed moving plans, Fairweather said.
While more buyers are expected to hit the market next year, the level of competition may not be as aggressive as in recent years, when bidding wars were the norm.
Other affordability factors may come into play, like rising insurance costs and property taxes, in turn slowing down competition, said CoreLogic’s Hepp.
“We’ll definitely see more buyers out there,” she said. “But I don’t see the competition heating up to the levels that it has over the last few years.”
Climate risks will bake into homes prices
The risk of extreme weather and natural disasters may anchor down home prices or slow down price growth in areas like coastal Florida, California and parts of Texas, which are at high risk of hurricanes, wildfires or other disasters, Redfin expects.
If palatable price tags have you eyeing homes in a high-risk market, be aware of potential complications.
For instance, home insurance policies in some of these markets are harder to come by, and tend to carry high price tags. The financial impact of natural disasters may also be felt in rising home maintenance and repair costs, said Redfin’s Fairweather.
What’s more challenging, “every part of the country is vulnerable” because the weather patterns are changing, she said. “Lately, there have been these atmospheric rivers in California that have caused days of heavy flooding, and those homes aren’t built for that.”
While there’s a lot of focus on Florida for hurricane risks, the state is more prepared for this natural disaster, unlike areas like Asheville, North Carolina, a mountainous city battered by the hurricane Milton earlier this year.
“We will probably see insurance increase pretty broadly because that mismatch between what homes were built for and the climate that they are going to be facing in the coming years,” she said.
The Federal Reserve announced Wednesday that it will lower its benchmark rate by another quarter point, or 25 basis points. This marks the third rate cut in a row — all together shaving a full percentage point off the federal funds rate since September.
For consumers struggling under the weight of high borrowing costs after a string of 11 rate increases between March 2022 and July 2023, this move comes as good news — although it may still be a while before lower rates noticeably affect household budgets.
“Interest rates took the elevator going up in 2022 and 2023 but are taking the stairs coming down,” said Greg McBride, chief financial analyst at Bankrate.com.
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Although many people, overall, are feeling better about their financial situation heading into the new year, nearly 9 in 10 Americans think inflation is still a problem, and 44% think the Fed has done a bad job getting it under control, according to a recent survey by WalletHub.
“Add in talk of widespread tariffs, and you’ve got a recipe for uneasy borrowers,” said John Kiernan, WalletHub’s managing editor.
In the meantime, high interest rates have affected all sorts of consumer borrowing costs, from auto loans to credit cards.
December’s 0.25 percentage point cut will lower the Fed’s overnight borrowing rate to a range of between 4.25% and 4.50%. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates consumers see every day.
From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how the Fed rate cut could affect your finances in the year ahead.
Credit cards
Most credit cards have a variable rate, so there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.
Since the central bank started cutting interest rates, the average credit card interest rate has only edged off extremely high levels.
“Another rate cut is welcome news at the end of a chaotic year, but it ultimately doesn’t amount to much for those with debt,” said Matt Schulz, LendingTree’s credit analyst. “A quarter-point reduction may knock a dollar or two off your monthly debt payment. It certainly doesn’t change the fact that the best thing cardholders can do in 2025 is to take matters into their own hands when it comes to high interest rates.”
Rather than wait for small annual percentage rate adjustments in the months ahead, the best move for those with credit card debt is to consolidate with a 0% balance transfer card or a lower-interest personal loan, Schulz said.
Otherwise, ask your issuer for a lower rate on your current card — “that works way more often than you’d think,” he said.
Customers shop for groceries at a Costco store on December 11, 2024 in Novato, California.
Justin Sullivan | Getty Images
Auto loans
Auto loan rates are also still sky-high — the average auto loan rates for used cars are at 13.76%, while new-vehicle rates are at 9.01%, according to Cox Automotive.
Since these loans are fixed and won’t adjust with the Fed’s rate cut, “this is another case where taking matters into your own hands is your best move,” Schulz said.
In fact, anyone planning to finance a car may be able to save more than $5,000, on average, by shopping around for the best rate, a 2023 LendingTree report found.
Mortgage rates
Because 15- and 30-year mortgage rates are fixed and mostly tied to Treasury yields and the economy, they are not falling in step with Fed policy.
As of the latest tally, the average rate for a 30-year, fixed-rate mortgage increased to 6.75% from 6.67% for the week ending Dec. 13, according to Mortgage Bankers Association.
“Mortgage rates have gone up — not down — since the Fed began cutting interest rates in September,” said Bankrate’s McBride.
“With expectations for fewer rate cuts in 2025, long-term bond yields have renewed their move higher, bringing mortgage rates back near 7%,” he said.
But since most people have fixed-rate mortgages, their rate won’t change unless they refinance or sell their current home and buy another property.
Anyone shopping for a home can still find ways to save.
For example, a $350,000, 30-year fixed mortgage loan with an average rate of 6.6% would cost $56 less each month compared to November’s high of 6.84%, according to Jacob Channel, senior economic analyst at LendingTree.
“This may not seem like a lot of money at first glance, but a discount of about $62 a month translates to savings of $672 a year and $20,160 over the 30-year lifetime of the mortgage,” he said.
Student loans
Federal student loan rates are also fixed, so most borrowers won’t find much relief from rate cuts.
However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates. As the Fed cuts interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz.
Still, “a quarter-point interest rate cut would reduce the monthly loan payments by about $1 to $1.25 on a 10-year term, about a 1% reduction in the total loan payments,” Kantrowitz said.
Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.
Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.
Savings rates
While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
As a result of the Fed’s previous rate hikes, top-yielding online savings account rates have made significant moves and are still paying as much as 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.
“The prospect of the Fed moving at a slower pace next year is better news for savers than for borrowers,” McBride said. “The most competitive yields on savings accounts and certificates of deposit still handily outpace inflation.”
One-year CDs are now averaging 1.74%, but top-yielding CD rates pay more than 4.5%, according to Bankrate, nearly as good as a high-yield savings account.
Blank Social Security checks are run through a printer at the U.S. Treasury printing facility February 11, 2005 in Philadelphia, Pennsylvania.
William Thomas Cain | Getty Images
During the Senate’s final days of business in this Congressional session, it is expected to vote on a bill that would change certain Social Security rules.
The bill — the Social Security Fairness Act — would repeal provisions that reduce Social Security benefits for some individuals who also receive pension income from jobs in the public sector.
On Nov. 12, the House of Representatives passed the bill with the support of members of both sides of the aisle.
Now, it is up to the Senate to pass the bill amid a packed schedule that also includes a deadline to avoid a federal government shutdown.
What Social Security rules would be repealed?
The Social Security Fairness Act would eliminate certain rules affecting some public pensioners — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO.
The WEP reduces Social Security benefit payments for individuals who also receive income from non-covered pensions — payments from employers who did not withhold Social Security taxes from their salaries.
The GPO adjusts Social Security spousal or widow(er) benefits for people who receive income from non-covered pensions.
Both rules have been in effect for decades.
The WEP was enacted in 1983 to make it so workers with non-covered pensions were not reimbursed as though they were long-time low wage earners. Social Security has a progressive benefit formula, which means low earners receive a higher income replacement rate.
The Government Pension Offset was established in 1977 and reduces Social Security benefits for spouses and surviving spouses who receive a pension based on their own government work that wasn’t subject to Social Security payroll taxes and Social Security spousal benefits based on their spouse’s work record.
Who is — and isn’t — affected by the rules?
The WEP affected 2.01 million individuals — or 3.1% of all Social Security beneficiaries — as of 2022, according to the Social Security Administration.
The GPO applied to almost 735,000 beneficiaries as of 2022, according to the Social Security Administration. That rule affects about 1% of all beneficiaries, according to previous estimates from the Congressional Research Service.
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To be sure, the WEP and GPO do not apply to everyone.
Specifically, the WEP doesn’t affect beneficiaries who have 30 or more years of substantial earnings under Social Security. The rule also doesn’t apply to individuals who fall under other specific categories, according to the Social Security Administration: federal workers who were first hired after Dec. 31, 1983; employees of non-profit organizations that were exempt from Social Security coverage as of Dec. 31, 1983; individuals who only receive pension income for railroad employment; and individuals whose only work that didn’t include Social Security taxes was before 1957.
The GPO generally doesn’t affect spouses or surviving spouses who receive government pensions not based on their earnings or who are federal, state or local government employees whose pension is from employment where they paid Social Security taxes.
The Social Security Administration provides a tool on its website to help estimate how a pension may affect Social Security benefits.
What are the chances the bill will pass?
Last week, Senate Majority Leader Chuck Schumer, D-New York, said he would put the Social Security Fairness Act up for a vote.
Schumer has since filed a notice that he intends to call a cloture vote on the motion to proceed this week. If the cloture vote to proceed has the necessary 60 votes, the rest of the process may go “fairly quickly,” said Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.
“The big vote is usually the motion to proceed,” Freese said. “If they can get 60 for that, then they should be in pretty good shape to get it done this year.”
A Senate version of the bill has 62 co-sponsors. However, there is no guarantee the bill will get 62 votes, Freese said. Two co-sponsors — Sens. Bob Menendez, D-New Jersey, and Dianne Feinstein, D-Calif. — are no longer in office. However, their replacements — Sens. Andy Kim, D-New Jersey, and Adam Schiff, D-California — both supported the bill when they were House members.
Yet another co-sponsor — Vice president-elect and current Sen. J.D. Vance, R-Ohio — may not be present to vote, Freese said.
Once a motion to proceed passes, amendments to the bill could be proposed if Senate leadership allows for it, said Emerson Sprick, associate director of economic policy at the Bipartisan Policy Center. Those amendments could seek to replace a full repeal of the rules with a different fix or to offset the cost of the benefit increases.
“It has not been the ideal process for a significant change to Social Security to go through,” Sprick said.
The co-sponsors of the House bill had to file a discharge petition to bring it to the floor for a vote, which means it didn’t go through committees. Similarly, lawmakers in the Senate have not had the opportunity to hear the drawbacks of a full repeal of the rules and the alternatives, Sprick said.
“Full repeal makes the program less fair and more financially insecure,” Sprick said.
How soon would affected beneficiaries see changes in their benefit checks?
The change for nearly 3 million Social Security beneficiaries may take time to implement, according to Freese.
The Social Security Administration, which is already short staffed, may lose another 2,000 employees if it does not get the additional funding it requested in the continuing resolution Congress is also working to finalize, she said.
Moreover, it would take time for the agency’s staff to reprogram its computers and then begin sending out the new benefit payment amounts.
If the change is not put into effect immediately, the Social Security Administration will likely retroactively send catch-up checks or deposits to make up for the difference, Freese said.
How will the bill affect other Social Security reform?
The Social Security Fairness Act has received strong support from groups representing firefighters, police, teachers and other government employees who would be affected by the repeal of these rules.
However, policy experts have generally voiced opposition to the change, since nixing the rules would alter the progressive nature of the program.
It would also move Social Security’s projected trust fund depletion date to six months sooner, while costing about $196 billion over a decade, according to the Committee for a Responsible Federal Budget.
Even without this change, the trust fund the program relies on to pay retirement benefits may run out in nine years, the program’s trustees have projected.
“We are racing to our own fiscal demise,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement criticizing the efforts to repeal the WEP and GPO rules.
If the bill passes, it would also affect future reform efforts. But the problems Social Security now faces are bigger than just paying for the WEP and GPO repeal, Freese said.
“The closer it gets to the depletion date, the harder it gets, because you end up having less flexibility in terms of what you can do for the program in order to make it solvent,” Freese said. “You have less time to implement the changes.”
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