Housing Market Predictions for 2025: What's Next for Buyers and Sellers

Housing Market Predictions for 2025: What's Next for Buyers and Sellers

As we step into 2025, the Chicago real estate market presents a dynamic landscape shaped by various economic factors, policy changes, and evolving buyer preferences. Here's an in-depth look at the key predictions for buyers and sellers this year.

1. Home Sales and Price Trends

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The National Association of REALTORS® (NAR) forecasts a notable increase in home sales for 2025. This optimism is fueled by an improving job market and recent stock market gains, which are expected to encourage more individuals to enter the housing market. NAR Chief Economist Lawrence Yun anticipates the addition of approximately 2 million new jobs in both 2025 and 2026, bolstering housing demand.

In terms of home prices, a moderate appreciation is expected. NAR projects a 2% increase in the median home price, reaching $410,700 in 2025. This tempered growth is attributed to an anticipated increase in housing supply, which should help balance the market and make homeownership more attainable.

2. Mortgage Rates Stabilization

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Mortgage rates have been a focal point for both buyers and sellers. Over the past year, the average 30-year fixed-rate mortgage fluctuated between 6.08% and 7.44%. Looking ahead, rates are expected to stabilize, with projections averaging between 5.9% and 6.1% in 2025, according to Freddie Mac.

3. Regional Market Highlights

United States: Rockford, Illinois has emerged as the nation's hottest housing market, surpassing traditional leaders. With a median home price of $242,000—significantly lower than the national average—homes in Rockford sell rapidly, averaging just 43 days on the market. This trend reflects a broader shift towards affordability in the Midwest and Northeast regions.

United Kingdom: The UK housing market is experiencing its fastest house price growth since September 2022. The Royal Institution of Chartered Surveyors (RICS) reported a rise in their house price balance to +28% in December, indicating a robust market. Surveyors expect this upward trend to continue, with both house prices and rents projected to rise further.

4. Evolving Buyer Demographics

The profile of homebuyers is shifting:

• All-Cash Purchases: All-cash buyers now constitute 26% of sales, driven by substantial housing equity gains in recent years (NAR).
• First-Time Buyers: The median age for first-time buyers has reached a record high of 38, indicating that individuals are purchasing homes later in life, possibly due to rising prices and the time required to save for down payments.
• Urban Living Resurgence: There's a renewed interest in urban centers, marking the largest increase in a decade, as buyers seek proximity to amenities and workplaces (Urban Land Institute).
• Multigenerational Households: These households have surged to an all-time high of 17%, primarily to reduce housing costs by combining incomes (Pew Research Center).
• Single Women Buyers: Single women represent 24% of home purchases, double the percentage of single men, highlighting a significant demographic in the market (NAR).

5. Challenges and Opportunities

• Affordability: Despite moderated price growth, affordability remains a concern, especially for first-time buyers.
• Inventory Levels: While inventory is expected to increase, shortages persist in high-demand areas, necessitating strategic planning for buyers.
• Economic Factors: Potential economic fluctuations could impact market stability, underscoring the importance of staying informed and adaptable.

Conclusion

The 2025 housing market is poised for growth, with increased home sales and stabilized mortgage rates. However, buyers and sellers should remain vigilant, considering regional variations and demographic shifts. Staying informed and flexible will be key to navigating the evolving Chicago real estate landscape successfully.

Sources:

National Association of REALTORS® Freddie Mac Realtor.com Royal Institution of Chartered Surveyors Urban Land Institute Pew Research Center Zillow

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