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After a downturn in home sales this year, the housing market is expected to turn around in 2025 and offer greater opportunities for prospective home buyers who are fed up with low inventory and high home prices. That was the prediction from economists during the National Association of REALTORS®’ virtual Real Estate Forecast Summit on Thursday. At the event, NAR announced its forecast for 2025, predicting upticks in new listings, home sales and home prices; however, price increases are expected to settle in at a more moderate 2% rise.
Economists said some markets are likely to fare better than others. NAR released its list of 10 hot spots for housing in 2025 during the event, with cities in the South and Midwest well represented.
“Important factors common among the top-performing markets in 2025 include available inventory at affordable price points, a better chance of unlocking low mortgage rates, higher income growth for young adults and net migration into specific metro areas,” said NAR Chief Economist Lawrence Yun.
One city on NAR’s list is Charlotte, N.C., which has seen 10% growth in jobs over the last five years, a soaring population and greater housing affordability. Forty-three percent of properties in the city are categorized as starter homes with a price below $324,000, making it particularly appealing to first-time home buyers and young families.
Joining Charlotte on the list is Knoxville, Tenn., which has attracted an influx of new residents. Homeowners there are making substantial wealth and equity gains, as local home prices are nearly double their pre-pandemic levels.
The following are the top 10 markets that nabbed a spot on NAR’s list of housing hot spots. (Note: The markets are listed in alphabetical order and not ranked.)
- Boston-Cambridge-Newton, Mass.-N.H.
- Charlotte-Concord-Gastonia, N.C.-S.C.
- Grand Rapids-Kentwood, Mich.
- Greenville-Anderson, S.C.
- Hartford-East Hartford-Middletown, Conn.
- Indianapolis-Carmel-Anderson, Ind.
- Kansas City, Mo.-Kan.
- Knoxville, Tenn.
- Phoenix-Mesa-Chandler, Ariz.
- San Antonio-New Braunfels, Texas
What May Be Driving Home Sales in Your Market
To compile its list, NAR considered several economic, demographic and housing factors that economists believe will serve as strong predictors of home sales in the new year, including:
- Fewer locked-in homeowners. Homeowners who locked in a low 2% to 3% mortgage rate in previous years have been hesitant to trade it in for today’s rates in the 6% range. Areas where the fewest homeowners hold ultra-low rates are likely to see the most homebuying activity, particularly as mortgage rates are expected to stabilize in 2025, according to NAR’s report.
- Faster job growth. Job growth often translates to higher home sales. This can instill buyer confidence in an area’s economic stability. Job growth also may be driven by employee income increases.
- Higher net migration. A boost in sales activity often occurs in places experiencing an influx of new residents. Home prices may escalate if the housing supply can’t keep pace with the population growth. A recent NAR study revealed the top motivations for moving.
- More households reach homebuying age. Households between 35 and 40 years old often are considered a key demographic for homeownership. The typical first-time home buyer is 38 years old, according to NAR’s research. Areas with a larger share of households entering this age bracket may see strong demand for homes.
- Long-tenured homeowners. Homeowners typically spend an average of 16 years in their home. Places with homeowners who’ve stayed longer may see them selling soon.
- Growing inventory of starter homes. Starter homes are typically priced at 85% of an area’s median home price. These lower-cost homes can offer greater accessibility to homeownership for younger or lower-income buyers.
- Fast home price appreciation. Home price increases typically indicate a strong local market and buyer demand. Soaring home equity creates wealthier homeowners, attracts investments and may offer prospective home buyers extra assurance in their purchase.
- More movers who purchase homes. As new residents move to an area, their choice of renting or buying can be an indicator for the housing market. If many newcomers decide to purchase a home, it could be a sign of long-term growth and stability for the local housing market; it likely means they intend to stay in the area, NAR’s report notes.
- Lower mortgage rates. Mortgage rates can differ by area. Places that offer lower mortgage rate averages may see an uptick in sales, as the lower rates could help improve housing affordability for prospective home buyers.
- Financially secure renters. Places where young adults are renting but can afford homeownership may see an increase in demand in 2025, as home prices and mortgage rates are expected to stabilize. Further, areas with a higher number of entry-level or lower cost homes may make these financially secure renters even more motivated to buy.
NAR’s top 10 housing markets for 2025 outperformed national averages for many of these sales drivers. Here’s how the top 10 markets measured up.
