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s we enter 2025, the real estate market is poised for significant changes driven by post-election economic adjustments and shifting buyer trends. The National Realtor's Association forecasts a 9% increase in existing home sales for 2025 and a 13% rise for 2026, indicating a dynamic year ahead. With potential fluctuations in mortgage rates and inventory levels, both buyers and sellers must navigate a competitive landscape filled with opportunities.
As the CEO of Halpern Residential at eXp in Phoenix, I've witnessed firsthand how economic factors and buyer behaviors influence the housing market. Here's a closer look at the trends expected to shape 2025, offering valuable insights for buyers, sellers, and real estate professionals alike.
Post-election market adjustments will impact the real estate market in 2025. Rising stock values may reduce bond demand, leading to stabilized or even declining mortgage interest rates. This leveling of the stock and bond markets could pave the way for improved mortgage conditions, stimulating buyer demand and creating a more dynamic market environment.
Mortgage rate reductions can significantly boost buyer activity, with even a modest 1% dip potentially bringing an additional 1 million buyers into the market nationwide. This creates a ripple effect: greater buyer activity boosts demand, competition, and home values, reshaping the landscape for buyers and sellers alike.
Phoenix continues to attract new residents due to its strong economy, job opportunities, and desirable lifestyle. This influx bolsters housing demand and maintains the city's status as one of the nation's most sought-after real estate markets. As a result, local buyers and sellers can expect competitive conditions, especially if migration trends persist.
Home prices are anticipated to rise modestly, with predictions ranging between 0.5% and 4.4%. These increases will vary by region, influenced by employment rates and local economic conditions. Buyers should remain informed about regional market variations to make strategic investments.
Despite incremental inventory gains, housing supply may struggle to keep up with demand, particularly if mortgage rates fall. This dynamic could reignite bidding wars, making it essential for buyers to act decisively and for sellers to position their homes competitively to maximize value.
Markets with greater affordability are expected to see price growth, while those grappling with affordability issues may stabilize or experience slight declines. Phoenix's relatively accessible price points compared to coastal markets make it an attractive destination for a diverse range of buyers.
Affordability concerns and rising construction costs are driving a trend toward smaller, more functional homes. In 2025, many buyers will prioritize efficiency and minimalism over sheer square footage, redefining buyer preferences and influencing how builders approach new developments.
The luxury market is expected to rebound in Q1 and Q2 of 2025 as confidence returns. This could lead to renewed demand for high-end properties, offering opportunities for sellers to reenter the market.
Affordability challenges remain a significant hurdle for Gen Z, Gen X, and millennial buyers in Phoenix, particularly those without equity gains to leverage. Younger buyers are expected to get creative with financing solutions, such as rate buydowns, to achieve homeownership in a competitive market.
If interest rates drop substantially, the real estate market will likely see intensified competition. Increased buyer activity means fewer negotiating opportunities for buyers and heightened urgency to secure properties. However, the extent of rate reductions remains uncertain, making flexibility and preparedness key for success in 2025.
The 2025 real estate market is set to be a dynamic blend of challenges and opportunities, shaped by trends and economic shifts, evolving buyer preferences, and regional market conditions. Staying informed and adaptable will be crucial to navigating these changes.
