Redfin’s 2025 predictions suggest a mixed landscape for the housing market, with more home sales than 2024, but many would-be buyers instead forgoing homeownership for alternative ways to build wealth.

The residential brokerage’s economists project a 4% uptick in home prices, driven by limited inventory and continued demand. While some buyers may be priced out, especially with mortgage rates expected to stay near 7%, there is still pent-up demand for homes, resulting in a slight increase in sales. Home sales are forecast to rise year over year between 2% and 9%, closing 2025 at an annualized rate in the range of 4.1 million to 4.4 million units.

High rates will potentially keep many buyers out of the market next year, with mortgage rates anticipated to fluctuate throughout 2025, averaging around 6.8%. Rates could dip if the economy weakens or if political changes ease financial pressures, but investors anticipate that President-elect Donald Trump’s proposed tariffs (which are favorable to inflation) and tax cuts (which would increase the country’s deficit) loom as risks that would push mortgage rates up.

Homebuilding may see an uptick, driven by easing construction regulations, a frequent talking point given the incoming Republican sweep of the executive and legislative branches. Even with more single-family homes built next year, however, Redfin expects that it will take a few years for the construction upswing to result in a meaningful shift in affordability. Renters, meanwhile, will benefit from more affordable rents in 2025, as wages rise and new rental units enter the market.

Redfin also forecasts that Gen Z will reshape the housing market by delaying homeownership, instead choosing to rent or live with family while seeking wealth-building opportunities outside of real estate. Despite this, the market for lower-priced homes is expected to grow, as older buyers priced out of more expensive homes will move down the price ladder due to high home costs.

Other takeaways from Redfin’s look-ahead to 2025:

• More consolidation within the real estate industry, as under a Republican administration, the Federal Trade Commission is more likely to approve mergers and acquisitions.
• More influence on the housing market from climate risks, particularly in coastal Florida and other disaster-prone areas, where home prices may stagnate or decline due to natural disaster concerns.
• A continuation of the return of population into big urban areas, especially in California.