As we move deeper into 2025, home demand still outweighs supply. Although that imbalance means home prices are still rising, most homebuyers are moving cautiously, causing prices to rise at a slower pace.

In November of 2024, home prices were up 5.4% from the same time the prior year, but that was the lowest annual increase since October 2023. Ten of the Top 50 most populous metro areas saw decreased year over year prices.

The pace of rising prices is returning to historic norms after being accelerated by the pandemic-fueled buying boom. According to the Redfin Home Index, November was the sixth-consecutive month where annual price growth slowed and the second-consecutive month where it dipped below 6%. By contrast Year-over-year prices spiked by as much as 21.7% in March 2022.

While home prices are slowing, analysts expect they will rise consistently in 2025 amid elevated mortgage rates and low supply.

Many buyers - and sellers - are looking to the year ahead.

Mortgage rates are always unpredictable, but are influenced by several factors, including the Federal Reserve's "Fed Funds Rate," which sets the rates banks charge each other for loans. The Fed rate isn't directly tied to mortgage rates, but its ups and downs tend to affect all consumer loans over time - including mortgages.

After two years of raising the rate to fight inflation, the Fed cut the Feds Funds Rate in September of 2024, and again in December, which could ease some of the borrowing pressure.

However, mortgage rates are also often affected by fluctuations in Treasury yields, which have been elevated throughout 2024, and especially so since the presidential election. Under President-elect Donald Trump, many bond traders are concerned about more inflation, which remain elevated due to inflation concerns driven by the strong economy and the anticipation increased deficit spending.

On the plus side, the housing supply is growing. In November, homebuyers saw more options on the market, with 1.675 million homes available - up 9.4% from 2023. Existing home sales rose 0.7% in November, up 4.5% year over year. Overall, 2024 saw flat home sales - about 4.1 million - but at that rate, sales would have been nearly 4.27million, encouraging data for 2025.

Looking ahead, prices may continue to slow. Trump has suggested the government purchase tracts of land for affordable housing, and wants to reduce construction regulatory costs, which builders could then pass down to consumers. This could be a monumental undertaking considering the breadth of regulatory bodies involved.

Most analysts expect subdued housing activity to continue in 2025. Fannie Mae forecasts modest declines in mortgage rates and home price growth, with existing home sales moving slightly upward. As is always the case in real estate, location will affect totals.