T
he US housing market is entering 2025 with a new dynamic, following a turbulent few years of price surges, rapid cooldowns, and fluctuating mortgage rates. While 2023 was relatively subdued after the pandemic-era frenzy, 2024 saw renewed momentum as buyers and sellers adapted to persistent affordability challenges. Despite home prices remaining elevated in many regions, demand has rebounded in key markets due to improving wage growth, increased housing inventory, and some moderation in mortgage rates.

    However, affordability remains a major hurdle, especially for first-time buyers facing high borrowing costs and limited supply in the entry-level segment. As we move into 2025, real estate activity is picking up, with certain metro areas emerging as hot markets due to strong job growth, demographic shifts, and continued demand for housing.

    Home sale prices are rising again, despite a high mortgage interest rate environment. After peaking at 26.1% in May 2021, year-over-year price growth has slowed but is now showing signs of growth, with home prices up 6.3% from the previous year by the end of 2024.

    Home sales volume has also rebounded, with year-over-year growth reaching 10.8% by December 2024, the strongest annual growth since mid-2021. This momentum is driven by factors such as improving wage growth, increased housing inventory, and some moderation in mortgage rates.

    Geographical differences are evident, with the Northeast and California dominating the rankings of hottest real estate markets. Connecticut leads the country with a composite score of 91.0, followed closely by New Jersey, Massachusetts, and Rhode Island. California ranks among the most active markets with a score of 73.9, driven in part by the difficulty of adding new housing supply due to densely populated cities and restrictive zoning laws.

    In contrast, many Southern and Mountain West markets have cooled off, with Texas cities like Arlington, Fort Worth, and Austin dropping into the bottom 20 of the rankings.