H
omebuyers may find 2025 a slightly more favorable year, but the bar is still set low. Last year was the worst for entry-level home affordability in four decades, with exorbitant property prices and mortgage rates making it tough for prospective buyers.

    According to Ivy Zelman's research firm, Zelman & Associates, entry-level homebuyers had it toughest last year, making up less than a quarter of purchases - the lowest rate since 1981. Housing analysts are likely tired of referencing the 1980s, which was one of the toughest times on record for home affordability.

    Despite the optimism that often comes with the new year, Zelman's projections suggest that 2025 will be better in many ways than 2024, but still full of challenges. Her team estimates that mortgage rates will remain high, with the 30-year fixed rate hovering around 6.7% before slipping to 6.5% in 2026.

    Home sales are expected to rise about 5% next year, driven by those who need to move and can't wait for lower borrowing costs. Existing home prices should increase at a modest pace of 3%, while new home prices will inch up by 1%. Single-family rent growth is expected to slow down, falling below 3% for the first time in a decade.

    Rent hikes will trail wage growth again, providing some relief for renters. The silver lining is that these increases won't break the bank, as wage growth outpaced rent growth last year and should continue this trend in 2025 and 2026.

    Multi-family supply growth will slow down but remain strong, with over 600,000 new multi-family setups going online in 2024. This surge in apartment construction has given tenants more options, keeping rent growth subdued.