A year ago, housing economists made bold forecasts about 2025.
They predicted mortgage rates would stabilize, inventory would finally loosen, and first-time buyers would keep struggling.
The forecasters ended up getting far more right than wrong. While some predictions didn't pan out as expected, most of 2025's major housing trends unfolded as anticipated, with the market showing modest but real signs of improvement.
What the Experts Got Right
1. Mortgage Rates Stabilized Near 6%
The National Association of Realtors predicted rates would hover around 6%, and they nailed it. The 30-year fixed rate averaged 6.72% for the year and currently sits at 6.19%. Not the dramatic drop buyers hoped for, but the stability mattered more to allow both sides to make moves with more confidence.
2. Housing Inventory Finally Increased
Forecasters expected the lock-in effect to ease, and it did. Homeowners with low mortgage rates who were choosing not to sell to avoid trading their rate for a higher one finally felt safe enough to start selling. Inventory jumped 27% to 33% year-over-year. Twelve states now have more homes on the market than before the pandemic.
3. First-Time Buyers Struggled Even More
Affordability challenges kept first-time buyers sidelined. Their market share dropped to a record low of 21%, down from 24%. That's the lowest share since 1981.
Those who did succeed often took creative approaches, said Jessica Lautz, Deputy Chief Economist and Vice President of Research at the National Association of Realtors.
"Some savvy first-time buyers saved by moving in with family before purchasing and saved on rent, while others doubled up with roommates to purchase a home," Lautz said.
4. All-Cash Buyers Dominated
Among repeat buyers, 30% paid all cash, an all-time high. The prevalence of cash purchases reflected broader wealth dynamics and the ongoing affordability challenges in the housing market.
"Home buyers who successfully entered the home buying market did so relying on wealth such as housing equity from their past home, financial assets from stocks or retirement savings, often a gift or loan from a friend or family member played a role," Lautz said.
5. Home Prices Rose Modestly
Both NAR and the Mortgage Bankers Association (MBA) forecast 2% to 4% appreciation, and the reality landed right in that range. The median existing home price hit $415,200, up 2.1% year over year. Forecasters correctly anticipated that elevated mortgage rates would prevent runaway price increases while tight inventory would prevent significant declines.
6. Single-Family Construction Grew
The National Association of Home Builders (NAHB) projected 4% to 5% growth in housing starts, and builders delivered. Single-family starts rose 6.5% in 2024, with slight gains continuing into 2025. The forecast proved accurate in capturing steady but not explosive builder activity as the market found equilibrium after years of volatility.
7. New Homes Captured More Market Share
Builders kept taking sales from the resale market, just as forecasters expected. Builders adapted to the challenging market by offering incentives and rate buydowns that made new construction competitive with resale homes. New construction home sales now represent about 30% of the single-family market.
8. Multifamily Construction Declined
NAHB forecast a 20% to 30% drop as the pipeline cleared, and multifamily starts fell 25% in 2024 before stabilizing mid-2025. The prediction captured market dynamics accurately. Years of apartment construction had created a wave of new supply, and developers needed time to absorb that inventory before breaking ground on new projects.
9. Buyer Demographics Shifted
NAR anticipated more singles and older buyers, and the data confirmed it. According to NAR's Profile of Home Buyers and Sellers, single women now represent 21% of buyers, the median first-time buyer age hit 40, and buyers with children dropped to a historic low of 24%.
"Single women are a consistent home buying segment, but they are surpassing the odds in the market purchasing in a limited inventory market with housing affordability a top concern," Lautz said. "Single women are doing so on the lowest household income to boot."
10. Refinancing Activity Stayed Near Historic Lows
Economists predicted that elevated rates would keep refinancing activity suppressed, and they were right. With the vast majority of homeowners locked into sub-5% mortgages and current rates above 6%, refinancing activity remained near the lowest levels in decades.
What the Experts Got Wrong
1. Existing Home Sales Would Rebound 9%
NAR forecast a 9% jump in existing home sales for 2025, bringing the total to about 4.46 million. Instead, sales remained around 4.0 to 4.1 million, essentially flat from the prior year. Elevated mortgage rates and stretched affordability kept many potential buyers on the sidelines despite higher inventory.
2. Mortgage Rates Would Drop Into the High 5% Range
Some forecasters predicted rates would end 2025 at 5.9% or lower. Instead, rates never meaningfully broke below 6%. They currently sit at 6.19% to 6.25%. The economy stayed stronger than expected, inflation proved more persistent, and the Federal Reserve moved more cautiously than forecasters anticipated.
3. Fed Rate Cuts Would Aggressively Lower Borrowing Costs
Forecasters expected four or more Fed rate cuts that would translate to meaningful mortgage relief. The outcome proved more complex. Tariff uncertainty, inflation concerns, and budget deficits kept mortgage rates from tracking Fed cuts. The Fed didn't make its first cut until September 2025, and even after cuts began, mortgage rates remained elevated.
Looking Ahead to 2026
Forecasters accurately predicted many of 2025's key trends. Some forecasts didn't materialize as expected, largely due to economic conditions that evolved differently than anticipated. For buyers heading into 2026, watch the fundamentals, understand your local market, and be ready to move when conditions align.
"The next year should show slightly lower mortgage interest rates and slightly higher housing inventory which will bode well for home buyers," Lautz said.
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