Could the housing market improve in 2025?

According to December data from the National Realtors Association, sales of existing homes in November 2024 rose, scoring the highest yearly gain since 2021, a cut in the negative trend of all last year.

The increase in sales could signal some positive changes for 2025, but some experts are less optimistic. Many of the real estate market's issues remain unresolved.

2024 was a terrible year for the real estate market. According to the WSJ, the industry expected a recovery, but the turnaround never came. Prices rose every month, and sales fell to historic lows.

By September, most experts knew it would be the worst sales year in decades. The AP said the fall exceeded predictions: previously-owned home sales fell 1% from August and 3.5% compared with 2023.

The news agency said sales fell for two consecutive months and were at their lowest since October 2010, when the market was still recovering from a crash.

The newspaper said that if mortgage rates continue to decrease, it will make homes more affordable, but the effect could be undercut by increasing home prices.

The newspaper attributes the boost in November sales to a summer decrease in mortgage rates but clarified that many potential buyers are still priced out of the market.

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One of the main drivers of prices is a low inventory tied to homeowners’ unwillingness to sell and give up on low mortgage rates from before the pandemic.

After the Fed cut interest rates, mortgages fell but quickly bounced back. According to the WSJ, mortgage prices have slowly separated from the Fed reference in recent years.

The newspaper said lenders often sell mortgage debt to investors. Since the real estate market is less safe than bonds, they demand a higher return, which increases mortgages.

However, it could also be a matter of timing. Real estate agents told the newspaper that the Fed took too long to cut rates, and homeowners usually prefer not to sell in the fall or winter.

According to the WSJ, many families prefer to buy homes in the spring and move in the summer while children are on school break, so the holdout could be simply related to that.

Lisa Sturtevant, chief economist at Bright MLS, told AP News that buyers could have been waiting for better rates or election results, which could now mean they would wait until after inauguration day.