The year 2025 has only just begun, and we're already in uncharted territory. From a second Trump administration to the lasting impacts of COVID-19 to new legislation impacting agent commissions and landlords, there are many different factors that may shake up the market. That begs the question—what is the future of the real estate industry in 2025 and beyond?
Only time will tell, but one thing is for certain; staying informed and up to date on the current trends in real estate is the only way to navigate the chaos and make wise decisions. So, to help get you up to speed, here are our housing market predictions for 2025 and how you can prepare.
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What Does a Trump Win Mean For the Housing Market?
What will happen to the housing market under Trump? It's a question many prospective buyers and sellers are asking themselves right now as they try to plan for the future. It's impossible to know for sure but there are a few different ways that actions of the Trump administration could impact the housing market in 2025. Here are the major factors to consider.
Tax Cuts
President Trump is a major proponent of tax cuts. His 2017 Tax Cuts and Jobs Act was one of the largest tax policy overhauls in decades and he's already proposed trillions of dollars of new tax cuts for individuals and businesses. So it's likely that similar legislation is coming, which may have positive impacts on home prices in 2025.
Lower taxes lead to more spending by the rich. That means the stock market will likely do well because people have more money to spend. The real estate market will also likely see a boost, and markets like New York City, in particular, should do very well.
Mortgage Rates
Mortgage rates will also significantly impact the housing market outlook in 2025. Rates were expected to gradually decline over the next few years as inflation cools, but that is up in the air now with the threat of tariffs. The Federal Reserve began cutting rates in September 2024, and Trump has promised to lower them even more.
Many experts predict that interest rates could drop below 5% by the end of 2025. So, if they continue to decline, housing prices under Trump could go up as more buyers will have access to capital.
Tariffs
However, the potential for tariffs in a second Trump term could also negatively impact the real estate forecast for 2025. There's been a lot of confusion over if and when the proposed tariffs will go into effect.
If implemented, tariffs will raise the cost of everything, which will inevitably hinder the market and possibly even cause a recession. It's still too soon to tell how tariffs will play out and what impact they will have on the overall economy, but it's something to keep an eye on.
Covid-19 and The Effects on the Real Estate Market
The long-term impacts of the COVID-19 pandemic are also important real estate trends in 2025 to consider. Pent-up demand from buyers who were forced to sit on the sidelines during the pandemic is driving up prices.
Now that interest rates are beginning to drop, we may see an increase in new listings and demand for real estate in 2025, as frustrated buyers feel more confident that it's finally time to make a move.
However, this is largely dependent on the overall economic conditions. If things improve or remain status quo, the real estate outlook in 2025 will be very positive. If things decline, then those same buyers may continue to wait on the sidelines.
A combination of housing market trends caused by the pandemic—including supply chain issues and tightening of monetary policies—led to a decline in the development of new homes as it was not economically feasible. So we'll likely see a dearth of new construction in 2025 and beyond. However, this could have a positive impact on resale values of market-wide inventory, as buyers have fewer options to choose from.
How the New Buyer Commission Rule Change Will Impact the Market
The changes in the new buyer commission rule are another major factor that will likely affect real estate projections in 2025. In 2024, the NAR settled a massive lawsuit that led to new rules regarding who compensates buyer's agents.
In the past, the seller traditionally paid both their representation and the buyer's agent out of the profits they made from the home sale. However, following the settlement, each party must compensate their own agent, which means buyers now pay the commission out of pocket if they want representation (unless otherwise negotiated).
This new rule change is one of the major real estate industry trends that could impact the market in 2025 and beyond. Many low-income buyers may opt to go without a broker if they can't afford to pay the fee out of pocket. That will likely mean these buyers won't get the best deals if they lack the market knowledge and negotiating skills needed to navigate the home-buying process confidently.
Affluent buyers likely won't think twice about paying the commission because they know that relying on an expert will save them more money on the overall deal. For them, it's a small price to pay to avoid making a costly mistake.
Plus, they'd rather hire someone to manage everything from start to finish, as they are busy people and rely on experts to keep things running smoothly. So, the new buyer commission rule change will likely result in wealthy buyers getting the best representation, while lower-income homeowners are forced to fend for themselves.
Potential Effects of the FARE Act on the NYC Market
The FARE Act is another piece of local legislation in NYC that is likely to have lasting impacts. Set to go into effect by the middle of 2025, the FARE Act requires agents to only receive compensation from the party that hired them.
As a result, tenants will be less likely to seek representation and instead gravitate toward listings represented by landlord's agents. It will also likely lead to a decline in the rate landlords are willing to pay agents.
At Undivided, we believe this is the right approach. It will lessen the burden on tenants to come up with an exorbitant amount of cash just to buy a home. Landlords will also be able to pay a fee that's on par with what is customary in other parts of the country. So overall, it's a win-win.
Those are some of the emerging trends in real estate in 2025 that savvy buyers and sellers should keep an eye on. However, even with the proper knowledge, navigating the new market landscape with confidence is easier said than done. Luckily, Undivided can help…
