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s interest rates remain high, homeowners and potential buyers are curious about what 2025 holds for the real estate market. Realtor.com has released its predictions for next year, offering insights into trends that might shape the housing landscape in Tennessee and beyond.

    While mortgage rates won't return to pre-pandemic levels anytime soon, Realtor.com forecasts a slight decrease from 2024's average rate of 6.7% to 6.3%. This could lead to home prices growing around 3.7% in 2025. As a result, sellers may continue to have the upper hand in high-demand areas, but buyers will still face challenges due to high mortgage rates and home prices.

    The market is expected to become less competitive than in previous years, but affordability issues will persist. Homeownership rates are predicted to drop by 0.3% from 65.6% to 65.3%, while existing home sales should increase by 1.5% to 4.07 million. The inventory of existing homes for sale is also expected to rise by 11.7%.

    Realtor.com's analysis highlights the importance of mortgage rates in shaping the market. When rates dropped in September 2024, the number of active homes for sale surged, indicating that lower interest rates can lead to increased inventory.

    In Tennessee, Realtor.com predicts varying sales growth and price increases across different metro areas:

    - Chattanooga: 2.2% sales growth, 6.3% price increase

    - Knoxville: 3.7% sales growth, 8.3% price increase

    - Memphis: 8.3% sales growth, 10.5% price increase

    - Nashville: 4.5% sales growth, 8.3% price increase

    The rental market is also expected to remain challenging in 2025, with the median asking rent predicted to be only 0.1% lower than in 2024. The South's lower-cost housing will continue to attract people, driving a 1.5% growth in rental stocks.

    Unfortunately for first-time homebuyers, 2025 may not be an ideal year due to high mortgage rates and increasing competition from repeat buyers and investors. As the homeownership rate is expected to drop slightly, many potential buyers might find it difficult to enter the market.