Real Estate Market Forecast: What to Expect in 2025 and 2026

Wondering what’s ahead for the market? A panel of over 100 industry experts recently weighed in on their forecasts for the 2025 and 2026 real estate market. Of course, no one can be certain about what the next couple of years will bring, but here’s what experts are predicting:

Home price growth in 2024 is forecasted at a final rate of 5.2%, followed by growth of 3.8% in 2025 and 3.6% in 2026, according to the Q4 2024 Fannie Mae (FNMA/OTCQB) Home Price Expectations Survey (HPES), The panel's latest estimates of national home price growth represent an upward revision from last quarter's expectations of 4.7% for 2024, 3.1% for 2025, and 3.3% for 2026, as measured by the Fannie Mae Home Price Index (FNM-HPI).

The Economic & Strategic Research (ESR) Group also surveyed panelists on their general housing outlook for 2025. On average, the panelists expect existing home sales to remain sluggish for another year, new home sales to trend slightly upward, and mortgage rates to remain elevated but modestly decline over the year to a national average of 6.3%.

The ESR Group also asked for the major factors driving their forecast. The largest group, representing roughly 80% of respondents, expects home price growth to decelerate, citing continued high mortgage rates, rising inventory, and slower wage growth as the main drivers. The minority of panelists, who expect faster home price appreciation, most commonly cited strong pent-up demand from first-time homebuyers, continued tightening of inventory, and easing mortgage rates. One might argue that easing mortgage rates would bring more inventory, and that may be true–but it would also bring more buyers to the market, essentially negating inventory gains. The complete results of the Q4 2024 HPES can be found here.

"While home price growth is expected to ease next year, HPES panelists' big-picture view for 2025 appears to be little changed compared to 2024, with most seeing another year of elevated mortgage rates and weak home sales," said Mark Palim, Fannie Mae Senior Vice President and Chief Economist. "We share our panelists' view that home price growth is likely to decelerate next year, as the mix of continued elevated mortgage rates and the run-up in home prices of the past four years will likely continue to strain affordability and remain an impediment to many would-be homebuyers."

Terry Loebs, founder of Pulsenomics, added: "Although a significant majority of experts expect the nationwide home value appreciation rate will diminish from recent levels, the panelists' annual average projected price increase through 2029 is still well above expectations for economy-wide inflation, suggesting that they expect affordability problems to persist well beyond 2025."

While industry experts foresee continued price growth deceleration in 2026, It’s a little early to predict specifics about inventory and rates. For years, the biggest contributor to the lack of inventory has been the mortgage market. Many homeowners are holding out on selling because they’d be doubling (or even tripling) their rate to get into a new home. If rates were to come down in 2026, we’d likely see an increase in both supply and demand, but until we have a significant increase in inventory (or a significant decrease in buyer demand) the scale won’t be tipping.