Forecasting the year ahead is always a delicate art—housing market experts may craft well-reasoned predictions in December, only to watch them unravel by March. Still, it’s worth paying attention when industry leaders align on key expectations for 2025. With that in mind, we’ve gathered insights from experts on the major factors shaping the real estate market in the coming year.
The short version? Don’t expect a boom, but there are reasons to anticipate some gradual improvements in the landscape.
01. WHAT IS THE OUTLOOK FOR THE ECONOMY?
The U.S. economy has defied recession fears and pulled off an impressive soft landing As we enter 2025, the economic outlook carries positive momentum, with steady growth and easing inflation. Consumers—the backbone of the U.S. economy—are solid financial shape, benefiting from robust gains in both wealth and income 2024, the S&P 500 surged by 22.5%, home prices climbed 6.8%, and real disposable income increased by 3.1%. This financial tailwind is expected to fuel consume spending growth of 2% to 4% in the year ahead.
While job growth has cooled recently, strong corporate earnings and declining interest rates should help reinvigorate hiring in 2025. Both households and businesses remain insulated from the full impact of high interest rates, thanks to the low fixed-rate mortgages and corporate debt secured during the pandemic-e borrowing boom.
1a. As of November 2024, U.S. inflation stood at 2.7%—down from a year a but still above the Federal Reserve’s 2% target.
1b. There are no signs of a housing downturn on the horizon. Lending standards today are far more stringent than they were before the Great Recession, and with persistently low inventory and high demand, a housing recession in 2025 appears unlikely.
02. WHERE WILL MORTGAGE RATES GO IN 2025?
After dipping as low as 6.2% in September 2024, the average 30-year mortgage rate has climbed to 7.08% as of early January 2025—despite three rate cuts from the Federal Reserve since September. The Fed is expected to implement two to four additional cuts in 2025. However, earlier forecasts of significantly lower rates appear to be shifting, with experts now anticipating moderation rather than a substantial drop. This means affordability challenges will likely persist throughout the year.
2a. National Association of Realtors (NAR) Chief Economist Lawrence Yun warns that “Mortgage rates will not decline in tandem” with the Fed’s rate cuts, pointing to the ballooning budget deficit as a key factor. “With a large budget deficit, there’s less mortgage money available. The government is borrowing so much of its money. A large budget deficit will prevent mortgage rates from going down to 4% as they did during President Trump’s first term.
2b. Redfin strategists predict that “Mortgage rates are likely to remain in the high 6% range throughout 2025, with the weekly average fluctuating b settling around 6.8%.”
2c. A panel of experts at Fannie Mae and Pulsenomics LLC expects “mortgage rates to remain elevated but modestly decline over the course of the year to 6.3%.”
2d. Realtor.com similarly forecasts a full-year average of 6.3%.
2e. Rates will average 6.4%, according to the Mortgage Bankers Association.
2f. Zillow offers a more dynamic outlook, cautioning that “buyers should expect plenty of ups and downs throughout the year.” Market swings are expected, with refinancing rushes accompanying the rate dip
2g. Greg McBride, CFA, chief financial analyst at Bankrate, predicts: “T average 30-year fixed mortgage rate will spend most of the year in the 6 with a short-lived spike above 7 percent, but never getting below 6 percent. Continued economic growth and worries about inflation and government debt will keep mortgage rates elevated.”
Buyers should brace for significant rate volatility in 2025. The key to navigating the market will be vigilance—monitoring rates closely and locking in as soon as a meaningful drop occurs. Waiting too long could mean missing out on what will likely be brief and unpredictable dips.
03. WILL HOME PRICES RISE IN 2025?
The median sale price for an existing home in the U.S. hit a record-high of $426,900 in June 2024, according to NAR. While prices have dipped slightly since then, they remain above last year’s levels. As of November 2024, the median home-sale price stood at $406,100—up 4.7% from November 2023—marking the 17th consecutive month of year-over-year price gains. Prices are expected to continue rising in 2025, though at a slower pace than the 4.5% average growth seen in 2024.
3a. Redfin forecasts a 4% increase in the median home-sale price.
3b. The Fannie Mae/Pulsenomics panel projects a 3.8% rise.
3c. Zillow predicts 2.6% home value growth in 2025.
3d. CoreLogic expects home-price appreciation to slow to 2%.
3e. The Mortgage Bankers Association forecasts a more modest 1.5% gain.
In Chattanooga, strong economic fundamentals, robust demand, and positive migration trends drove average home values up 6.2% to a record $390,133, even amidst constrained supply. It’s clear: Chattanooga remains a high-performing market with appreciation predicted to remain strong in 2025.
It is worth noting the story becomes more nuanced at the neighborhood level, with some areas seeing double-digit gains while others face steep declines. Hyper-local expertise will be critical for sellers, buyers, and investors to navigate this varied landscape and maximize opportunities.
04. WILL HOME SALES RISE IN 2025?
Anticipating lower mortgage rates, many buyers stayed on the sidelines in 2024. As a result, existing home sales declined 0.7% to 4.06 million, the lowest level since 1995.
The Lea Team Chattanooga Market Report 2025
However, momentum began shifting in late 2024. For the first time since 2021, NAR existing home sales data showed an increase, with sales rising 9.3% year-over-year in December.
It appears buyer attitudes toward mortgage rates may be evolving. “Home sales momentum is building,” said NAR Chief Economist Lawrence Yun in a December statement. “More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6 percent and 7 percent.”
Yet challenges remain. “The prospect of elevated mortgage rates throughout 2025 suggests that housing market activity will continue to be challenged,” warns Selma Hepp, Chief Economist at CoreLogic. “Lack of affordability and the continuation of the lock-in effect will keep sellers on the sidelines.”
4a. The Mortgage Bankers Association expects a 5.1% increase next year. 4b. Zillow forecasts a 7% rise.
4c. Fannie Mae’s economics team predicts a 4.2% bump.
4d. The National Association of Realtors predicts sales will jump 9%.
The Lea Team Chattanooga Market Report 2025 Chattanooga bucked the national trend, outpacing the rest of the country with a 1.4% increase in closed sales. This growth trajectory is expected to continue into 2025, fueled by multiple factors.
The local economy is thriving, supported by a diverse, skilled, and educated workforce. City and county leadership remain committed to sustainable growth, while Chattanooga continues to attract Sun Belt-driven migration. The region’s renowned natural resources and outdoor assets bolster its appeal, and the city’s gig-speed internet infrastructure positions it as a hub for blue-chip industries, cutting-edge technology firms, and entrepreneurship. With all these strengths in play, Chattanooga is poised for continued expansion in the coming year.
05. WHAT IS THE OUTLOOK FOR RENTAL PROPERTIES?
The multifamily sector has experienced a massive construction boom in the post-pandemic years, leading to an oversupply, rising vacancies, and increased concessions. In fact, more multifamily units have entered the market over the past few years than at any time in the last half-century, forcing property managers to compete aggressively for tenants. However, those fireworks are expected to fizzle in 2025—especially in the second half of the year.
Apartment renters have enjoyed a relatively tenant-friendly market in 2024, particularly when compared to the record-breaking rent surges of 2022. Rent growth has remained steady at a manageable pace, and concessions—such as free weeks of rent or complimentary parking—have hit record highs, according to Zillow. But renters should take advantage while they can. Zillow predicts these incentives will fade by the end of 2025, making it harder to negotiate that coveted free month of rent.
One trend that’s here to stay? Pet-friendly policies. According to Zillow’s forecast, landlords who resist allowing pets may find themselves at a disadvantage. “Rente are getting older (the median age is now 42), and they are no longer delaying major ‘adulting’ milestones such as moving in together or adopting a pet before buying a home,” the report states. With 58% of renters now owning pets—up from 46% pre-pandemic—demand for pet-friendly housing is at an all-time high. Many renters even report passing on properties that don’t accommodate their furry companions. For landlords, making room for pets is shifting from a perk to a necessity in order to stay competitive.
06. WHAT IS THE OUTLOOK FOR NEW HOMES?
The National Association of Home Builders (NAHB) regularly surveys builders for its monthly Housing Market Index (HMI). The December HMI data revealed a notable shift in sentiment, with future sales expectations reaching their highest level in nearly three years.
“While builders are expressing concerns that high interest rates, elevated construction costs, and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” said NAHB Chairman Carl Harris in a statement.
6a. There are still opportunities for buyers to secure savings on new homes. 31% of builders reduced home prices in December, with an average price cut of 5%, according to NAHB data. Additionally, 60% of builders offered sales incentives, making new construction an appealing option for cost-conscious buyers.
6b. The value of small condos and townhomes is finally stabilizing after remote work trends left many downtowns emptier in recent years. Meanwhile, the appreciation of larger properties—though still positive—continues to soften as buyers reassess their priorities.
6c. The pandemic-era demand for ever-larger homes is fading. Buyers are increasingly embracing smaller, more efficient spaces as a sustainable a affordable alternative. The term “cozy” has surged in listing descriptions—35% more in 2024 compared to 2023—signaling a shift away from cavernous open floor plans toward more intentional compartmentalized spaces with distinct style and purpose.
07. WHAT IS THE OUTLOOK FOR SUPPLY?
Housing inventory has been on the rise, with a 3.8-month supply recorded at the end of November 2024, according to existing-home-sales data from the National Association of Realtors (NAR).
While this remains below the 5-to-6-month threshold typically associated with a balanced market, it marks a significant 17.7% improvement from a year ago. However, don’t expect a surge in inventory from existing homeowners, warns Greg McBride, Chief Financial Analyst for Bankrate. “Mortgage rates won’t fall enough to spur an increase in existing-home inventory. Most of the inventory growth in 2025 will come from new construction,” he explains.
The bottom line? 2025 is expected to remain a seller’s market across much of the U.S. In one well-respected long-range forecast, U.S. News & World Report predicts that this trend could persist through 2029.
7a. “2025 is expected to be the most buyer-friendly market since 2016,” according to the Realtor.com team. They note that inventory levels will reach their highest point since just before the pandemic, giving buyers more options.
7b. Inventory is expected to grow to 4.1 months’ supply in 2025, according to Realtor.com. They explain that “anything under four months is typically considered a seller’s market, while a supply of 4 to 6 months is a balanced market.” (A true buyer’s market—anything above six months—is not on the horizon anytime soon.)
Chattanooga has outpaced the national trend, with a 25% increase in inventory from 2023 to 2024. However, supply remains below the national average at just 3.0 months, according to data from the GCAR 2024 Annual Report. This means Chattanooga is still a strong seller’s market, where buyers face stiff competition for available homes.
This inventory growth is largely driven by a few key neighborhoods experiencing above-average increases, primarily due to new construction. The following chart breaks down median sales prices and inventory levels by area in Greater Chattanooga, revealing that the housing recovery remains uneven across different neighborhoods. For buyers, sellers, and investors alike, hyper-local expertise will be crucial in navigating Chattanooga’s varied market conditions and identifying the best opportunities.
08. WHAT ARE THE POTENTIAL POLITICAL IMPACTS?
The potential impact of the new presidential administration on housing remains an open question. Policy decisions in 2025 could shape everything from mortgage rates to new construction and overall market confidence.
8a. “Investors are anticipating that if Donald Trump implements a significant portion of his proposed tax cuts and tariffs, and the economy stays strong, the Fed will only cut its policy rate twice in 2025, keeping mortgage rates high,” say Redfin economists Dar Fairweather and Chen Zhao in their 2025 forecast.
8b. The prospect of regulatory relief has also buoyed builder sentiment. Fairweather and Zhao note, “The Republican sweep of the White House, Senate, and House has improved builder confidence bringing renewed optimism that regulatory burdens may ease.”
While it remains to be seen how these policies will unfold, the housing market will be watching closely to see whether 2025 brings relief on affordability, financing, a supply-side constraints.
09. COMMERCIAL AND INVESTMENT OUTLOOK:
The commercial real estate industry has faced a gauntlet of challenges over the past four years—pandemic disruptions, high inflation, rising interest rates, and a surge of new developments. Yet, its resilience has been remarkable, proving once again that real estate remains the foundation of business operations.
As we step into 2025, commercial real estate fundamentals are holding steady, with even the beleaguered office sector seeing signs of a turnaround. Despite lingering uncertainties, the U.S. economy is positioned for growth, fueled by strong consumer spending, easing financial conditions, and rising productivity.
Economic expansion and improving market fundamentals will help drive a moderate recovery in real estate investment activity this year, even as the 10-year Treasury yield remains above 4%. Cap rates are expected to compress slightly, offering investors opportunities to lock in long-term returns at levels unseen in years.
9a. The office market’s slow recovery, which began in 2024, will ga momentum. Shortages of prime office space will begin emerging toward the end of the year, signaling a steady revival in America’s downtowns.
9b. Retail heads into 2025 with the lowest vacancy rate of any commercial real estate sector. While some retailers will continue consolidating, demand is expected to rise in suburban markets and Sun Belt cities, bringing institutional capital back to the sector.
9c. Industrial real estate will continue riding the e-commerce wave, but leasing activity will revert to pre-pandemic norms. Vacancies in older properties will remain elevated as tenants prioritize modern, high-quality spaces. The market remains tenant-favorable but is expected to tighten toward year-end.
9d. After two years of unprecedented apartment construction, vacancies will edge down in 2025 as demand remains strong. Economic expansion will support household formation, while the high cost of homeownership continues driving renters toward multifamily housing.
THE BOTTOM LINE
A strong economy, a favorable political climate, growth in the new homes sector, and a shift in buyer expectations regarding mortgage rates all point to 2025 being a more favorable year for buyers and sellers compared to 2024. However, the persistent combination of high mortgage rates, elevated home prices, and limited inventory levels suggests that, while the market may improve slightly, 2025 will still be a challenging year for buyers and sellers alike, especially when compared to the explosive growth seen in the post-pandemic boom.
Mortgage rates will remain in the spotlight as we move into 2025. A brief dip to two-year lows sparked renewed hope among buyers, but the uptick in October served as a stark reminder of their volatility. This prolonged period of high rates is driving a crucial shift in buyer behavior: fewer buyers are waiting for lower rates or prices, as evidenced by the recent uptick in sales activity. This could be a sign that 2025 will see more movement in the market than 2024.
Buying a home in 2024 was surprisingly competitive, even with affordability challenges, but buyers can expect some additional breathing room in 2025 as inventory levels are set to increase. Experts predict a more active housing market with greater choice for buyers, but those looking to purchase—or refinance—should brace themselves for some volatility and be ready to act when the timing aligns with their goals.
Given the complexities of today’s market, now more than ever, it’s wise to lean on the expertise of an experienced local real estate agent. While the overall forecast suggests another seller-friendly year in Chattanooga, the dynamics on a neighborhood level are anything but uniform. Some areas are seeing double-digit growth, while others are facing significant declines. Hyper-local expertise will be crucial for buyers and sellers navigating this diverse market landscape.
If you’re planning to enter the housing market in 2025, let one of our seasoned professionals guide you through the process. Our deep knowledge of the market, paired with hands-on experience, positions us to offer tailored strategies whether you’re buying, selling, investing, or building. When you’re ready to move forward, we’re here to help you strategize and succeed.
SOURCES
1. https://www.nar.realtor/magazine/real-estate-news/whats-next-for-the-2025-housing-market
2. https://realestate.usnews.com/real-estate/housing-market-index/articles/housi ng-market predictions-for-the-next-5-years
3. https://www.zillow.com/research/2025-housing-predictions-34620/
4. https://www.bankrate.com/real-estate/housing-market-2025/
5.https://www.usatoday.com/story/money/personalfinance/real-estate/2024/12/ /housing market-forecasts-for-2025/76943094007/
6. https://www.cbre.com/insights/books/us-real-estate-market-outlook-2025/economy
7. https://www.housingwire.com/articles/housing-market-forecast-2025-nar-mb a/
8. https://fred.stlouisfed.org/series/MEDSQUFEE16860
9. https://tradingeconomics.com/united-states/housing-starts-multi-family
10. https://tradingeconomics.com/united-states/existing-home-sales
11. https://www.nar.realtor/research-and-statistics/housing-statistics/existing-hom e-sales
12. https://www.mortgagenewsdaily.com/data/existing-home-sales#chart-existin g-home-sales-vs-30yr-rate
REPORTS
8. Commercial:
https://drive.google.com/file/d/1_505h87YJfER_xVfOLo2Ezi4yX9pgkzH/view? p=sharin g
13. GCAR 2024:
https://drive.google.com/file/d/1FezjGbWBnq_swC5c5NBNqctcJFTaAv1f/view sp=sharing
10. GCAR January with Historical:
https://drive.google.com/file/d/1kvhT6QbEyL76QggNkeZRsBg3UboNqlh-/vie usp=shar ing
11. FlexMLS January:
https://drive.google.com/file/d/1ZqvgETt9hEjhMsAaRZYu70OB5Zu9uN35/vie usp=sha ring