| Key Points – National Association of Realtors forecasts a 6% average for 30-year fixed-rate mortgages in 2025, boosting housing affordability and demand. – Housing starts projected at 1.45 million, with single-family units leading growth. – Median existing home price expected to rise to $410,700, with a 2% annual increase in house prices. |
The National Association of Realtors (NAR) has forecasted that the average U.S. 30-year fixed-rate mortgage will drop to around 6% in 2025, bringing much-needed relief to homebuyers and potentially reviving a sluggish housing market. This rate decrease is expected to make homeownership more accessible for many prospective buyers, helping to stimulate both new housing construction and sales of previously owned homes.
According to the NAR’s latest projections, the housing market will see about 4.5 million existing home sales in 2025, a slight improvement over current levels. House prices are anticipated to rise by approximately 2%, with the median price for an existing home reaching $410,700. This price increase aligns with the general trend in the market, but the forecasted decline in mortgage rates could provide relief to homebuyers struggling with affordability challenges.
In particular, the NAR’s prediction that mortgage rates will stabilize around 6% offers hope to those shut out of the market due to the higher rates seen in recent years. With the current mortgage rate hovering near 7%, many prospective homebuyers have been unable to afford median-priced homes. If rates do indeed fall to 6%, approximately 6.2 million households will be able to afford homes at the median price, giving a much-needed boost to the housing market. This is a stark contrast to the present situation where higher rates have made it difficult for many to qualify for loans, especially first-time buyers.
Over the past few years, the housing market has been affected by the Federal Reserve’s aggressive monetary policy tightening, which increased borrowing costs and led to a slowdown in home sales. Additionally, the so-called “rate-lock” effect has worsened the supply crunch. Many homeowners with mortgage rates below 5% have been reluctant to list their homes for sale, fearing they won’t be able to find a similarly low rate on a new home. As a result, the market has faced limited inventory, which has driven up home prices and further strained affordability.
To address the lack of available homes, builders have focused on constructing smaller homes, which have appealed to buyers seeking more affordable options. This has led to an increase in new home sales, which are expected to continue rising in 2025, with the NAR projecting 1.45 million housing starts, the bulk of them for single-family units. These new homes could provide much-needed inventory, helping to ease the supply issues that have plagued the market.
Despite the positive outlook for 2025, challenges remain. While mortgage rates are expected to decline, they are still relatively high compared to historical norms, and inventory levels are unlikely to return to pre-pandemic levels anytime soon. This ongoing supply shortage will continue to place upward pressure on prices, making homeownership more difficult for some buyers. Additionally, the affordability gap between different regions will continue to vary, with some markets remaining out of reach for many potential buyers.
Nonetheless, the prospect of lower mortgage rates has sparked optimism in the housing market. A stabilizing rate at 6% could provide the necessary boost to allow more buyers to enter the market, driving both demand for existing homes and new construction. This change would also give homebuilders more confidence to move forward with projects, further stimulating the economy.
The ongoing reduction in mortgage rates, alongside a resilient economy, could help buyers overcome affordability barriers, especially in more moderately priced markets. As 2025 approaches, all eyes will be on mortgage rates and the broader housing market to see if these predictions hold true and bring about a much-needed shift toward recovery.