These Are the 3 Real Estate Markets to Watch in 2025 — And What Brought Us Here

Over the past couple of years, mortgage rates have soared, putting welcome pressure on a housing market sizzling out of control. Recently, this inferno has begun cooling. It's led some analysts to wonder: Will the housing market continue to chill in 2025 or crash in a fiery blaze of sizzling rates? According to Neda Navab, President at Compass, housing remains in limited supply because people who bought homes in the past few years and locked in good rates aren't selling. This tightness of inventory keeps prices from slipping any lower, which continues pricing many would-be homeowners out of the market, especially those who've never purchased a home. Prices are still pretty high when measuring YoY, but they're nothing like they were in early 2022. Wherever mortgage rates happen to go in the near future, housing prices are likely to follow. So, what's it look like on the horizon?

2025 Market Forecast

Those in the housing industry continue to warn against attempting to time or beat the market. The economy remains in a state of flux, and uncertainty still looms. Whether individuals decide to buy a home now or wait is ultimately a personal decision. What’s their motivation? Their situation? Buying may not be feasible for some, but waiting could also prove to be a mistake. For those who decide to wait, there’s no guarantee that home prices or mortgage rates will improve significantly.

As 2024 draws to a close, experts are closely monitoring the economy for signs of stabilization. Inflation, interest rates, geopolitical tensions, and legislative decisions remain key factors pulling the economy in various directions. While there was some market cooling over the past two years, mortgage rates in 2025 are still considerably higher than they were in early 2022. Home prices have shown signs of plateauing but remain elevated, posing challenges for affordability. In October 2024, the median sales price for existing homes hovered around $415,000 — reflecting a modest 4% increase compared to October 2023 but still significantly above pre-pandemic levels. Mortgage applications have yet to recover fully, as high borrowing costs and inventory shortages persist.

Despite these challenges, some economists believe there may be room for optimism in 2025. Recent indicators suggest mortgage rates have started to decline steadily, giving potential buyers some relief. As of late 2024, rates had dropped by nearly a full percentage point over the past six months, marking the most significant easing since the early 2020s. While the pace of change remains uncertain, industry professionals are hopeful that a gradual stabilization in interest rates and increased construction activity might lead to improved inventory levels in the housing market. However, buyers should remain cautious, as affordability and economic conditions could still fluctuate in the months ahead.

Inventory Predictions for the Real Estate Housing Market in 2025

The housing market crash in 2008 took more than just the average person's home and savings. It also demolished new home construction—and the market has never recovered entirely or been the same since. The continued lack of new builds is putting pressure on an already limited supply of homes, leaving many people wondering if now is the right time to buy or if holding out hope for a home is a better option.

Should You Buy Right Now or Hold Off Until Later in 2025?

No matter what the housing market looks like, how mortgage rates shake out, or the Fed's next move, buying a home is an extremely subjective, private decision. A house represents the largest "big ticket item" people will ever purchase. Your financial position — private and subjective — should be rock solid before taking on this type of responsibility. A mortgage calculator can help you determine how much house you can afford by estimating monthly costs. At the same time, buying a home shouldn't be something you prepare for by "predicting" what will happen in the market months down the road. Many potential homeowners are currently waiting it out in hopes of lower home prices and mortgage rates. The rate drops over the past few months are promising, but it's also possible that those who wait could be disappointed if prices skyrocket again. Hopefully, inflation has reached its peak, and all industries will begin to even out and feel relief.

Ones to Watch — The 3 Hottest Real Estate Markets to Watch in 2025

So, should you wait? Or should you buy? If you decide to buy, consider the following. As 2025 approaches, several U.S. real estate markets are poised for significant growth, driven by factors such as affordability, job opportunities, and population influx. Here are three markets to watch:

• Colorado Springs, Colorado
• Miami, Florida
• Virginia Beach, Virginia

Let's see why these real estate housing markets are the top contenders:

Colorado Springs

Why this Colorado destination made the list

Ranked as the top market for 2025, Colorado Springs offers breathtaking mountain views, top-notch schools, and a strong sense of community. The city is expected to see a 27.1% increase in existing-home sales, reflecting its growing appeal to homebuyers seeking a blend of natural beauty and urban amenities. [source]

Miami

Why Miami made the list

Miami's unique cultural blend and active social scene continue to attract both domestic and international buyers. With a projected 24% increase in home sales, the city's real estate market is set to remain vibrant, offering diverse opportunities for investors and homeowners alike.

Virginia Beach

Why Virgina Beach made the list

Known for its extensive coastline and robust defense sector job market, Virginia Beach is anticipated to experience a 23.4% rise in home sales. The city's appeal to both military personnel and retirees contributes to its dynamic housing market.

What's Next?

Keeping your finger on the pulse of the real estate housing market in 2025 could help you find your dream home or the perfect fix-and-flip investment. If you’re interested in learning more about the market and what’s to come for 2025, check out the Prospect by Buildout blog.