Those who braved the housing market in 2024 faced one of the slowest sales years in three decades. Next year looks to be a little better.

Many of the challenges that have kept potential buyers and sellers away this year, like mortgage rates of 6 to 7 percent and home prices near record highs, aren’t going anywhere. But housing experts expect there will be more homes on the market next year as buyers and sellers adjust to today’s world of higher interest rates.

The housing market has been effectively stuck since mortgage rates began rising rapidly in 2022. Homeowners lucky enough to lock in rates around 3% in previous years were suddenly reluctant to move if it meant taking out a new mortgage. at a rate higher than 3%. double.

But this “lock-in effect” may finally begin to ease in earnest next year, as the life events that always push people to move – births, deaths, marriages, divorces and job changes – take hold. continue as mortgage rates fall and improving inventory sparks more sparks. price competition.

Learn more: Mortgage Rates Are Falling: Is It a Good Time to Buy a Home?

Real estate agent Scott Pratt, who works in Buford, Ga., north of Atlanta, said business has been slow for much of the year, but he expects to see more inventory arriving on its market this spring. He thinks buyers might find better deals as the year progresses, and that sellers who had been sitting on the sidelines would adjust their prices to respond to the current market.

“It’s going to be another year of pain, but by the end of the year, some of these people who said they were going to be locked up forever and wanted to leave…they’ll be moving out,” he said.

Expect a “slow climb”

Complicating the recovery is the fact that homeownership remains unaffordable in much of the country.

Median house prices today are about 30% higher than before the pandemic, outpacing income gains during the same period. Higher mortgage rates, rising insurance costs and high property taxes add additional challenges for potential buyers.

Ongoing affordability issues mean any uptick in transactions will likely be well below historical averages.

“We think the rise is going to continue to be slow,” said Danielle Hale, chief economist at Realtor.com, who expects existing home sales to rise 1.5% next year to reach 4.07 million. This figure would be significantly lower than the average of 5.28 million homes sold annually between 2013 and 2019.

Surveys suggest consumers would need mortgage rates to reach 5.5% before they would cash out en masse. Few housing experts expect rates to reach that low next year, especially amid uncertainty around President-elect Donald Trump’s economic policies. But mortgage rates between 6 and 6.2 percent this year were enough to spur an increase in buying and selling, and those levels will remain possible next year.

Learn more: Why are property prices so high?

Zillow predicts a choppy path for mortgage rates in 2025, starting with a decline, then a rise, then another decline. Such volatility is typical in most years, and next year will add unknowns related to the presidential transition and the Federal Reserve’s current rate cut cycle, said Orphe Divounguy, senior housing market economist.

Zillow economists expect rates to end 2025 below current levels by about 6.7%, but note “there are no guarantees.”

Realtor.com estimates that rates could average 6.3% next year. Broker Redfin, on the other hand, also expects fluctuations next year but thinks the average could stay around 6.8%, close to current levels.

Los Angeles-based real estate agent Walter Franco Jr. said even slightly lower rates next year probably wouldn’t be enough to spark a flurry of activity in his pricey market. Buyers looking for homes in the $1.5 million to $2 million range aren’t very sensitive to rate changes, but those looking for cheaper options are, he said.

“At that entry-level price point, the pricing really crushes them,” Franco said.

Learn more: When will mortgage rates drop? A look at 2024 and 2025.

Market activity will vary across the United States

Nationally, many economists predict home prices will rise between 2 and 4 percent next year, around historical averages. But the strength of the real estate market likely varies widely by location. More expensive markets along the coasts appear poised for bigger price increases due to a lack of new buildings and the abundance of wealthier buyers who have benefited from stock market gains in recent years.

On the other hand, cities in Florida and parts of the Southeast and Midwest may not see as big gains. Florida’s condo market continues to be in crisis as owners struggle to afford hefty repair bills resulting from the Surfside condo collapse in 2021. And real estate prices are expected to stagnate or even fall in certain less prosperous regions, while those on the lowest incomes struggle to afford housing.

“We’re set up in such a way that those who are advantaged will continue to be advantaged in this housing market, and those who have less access will continue to have less,” said Lisa Sturtevant, chief economist at Bright MLS. .

Sturtevant expects home price appreciation to be strongest in already high-cost metropolitan areas like Boston, New York and Washington, DC. Cities that saw the most aggressive price increases during the pandemic, followed by price declines last year, like Tampa, Florida. ., and San Antonio, Texas – could see smaller gains or even price drops.

Meanwhile, unknowns surrounding the Trump administration’s economic policies threaten a fragile recovery. Some policies he proposes, like tax cuts and tariffs, would likely worsen inflation and force interest rates on products, including mortgages, to remain high for longer. But homebuilders are enthusiastic about his commitment to deregulation, which could make it easier for them to build and help lower prices by increasing the supply of housing.

Jon Benya, a Waldorf, Md.-based real estate agent who works with many government officials, entrepreneurs and members of the military, said Trump’s talk of shrinking the size of the federal government or moving some agencies away from Washington could be sufficient. to cool activity in southern Maryland.

“Perception is reality, and when you suffer from job insecurity because you fear your job will be eliminated, finding new housing is the last thing on your list,” Benya said.

Claire Boston is a senior reporter for Yahoo Finance, covering housing, mortgages and home insurance.

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