2025 Housing Boom Predicted: Top 7 Must-Know Facts!

Real estate agents, it's time to look ahead with optimism!

Author

Tim and Julie Harris
September 27, 2024

HARRIS Real Estate Daily

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Real estate agents, it's time to look ahead with optimism! After a few tough years in the housing market, things are about to turn around in a big way. Experts are predicting a surge in housing activity starting in 2025, and that’s something we can all get excited about.

 Whether it's falling interest rates, favorable demographic shifts, or an increase in new construction, the future of the housing market looks bright. Let's break down what’s coming and why now is the time to prepare for the opportunities ahead.

1. Interest Rates Could Drop Below 5%—Get Ready for More Buyers

Interest rates have hovered around 6% recently, but let’s not forget how high rates were back in the 1980s—above 15%! Even though rates are higher than the ultra-low pandemic levels, they’re still historically low, and many buyers are eager to jump in. And here’s the kicker: the Mortgage Bankers Association (MBA) predicts that rates could dip below 5% by 2025. What does that mean? Simple—more affordability equals more buyers.

If rates drop as predicted, home sales could rise by as much as 5-12%. That’s anywhere between 200,000 and 480,000 additional sales a year. The message for agents is clear: prepare for a busier market with plenty of motivated buyers looking for their next home.

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2. Demographic Shifts: Millennials, Gen Z, and Baby Boomers in Play

The housing market is set for a demographic push that’s hard to ignore. Now in their prime home-buying years, millennials made up 43% of homebuyers in 2022. This generation, now aged 27 to 42, isn’t just looking for starter homes—they’re also upgrading as their families grow. Meanwhile, Gen Z isn’t far behind. With 72% of Gen Z planning to buy a home within the next five years, we’re about to see a new wave of demand.

But let’s not forget about the Baby Boomers. Many Boomers are downsizing and looking for smaller, more manageable homes in their retirement years. 39% of sellers in 2022 were Boomers. This will continue to open up the inventory for younger buyers and provide agents with more opportunities to help both generations meet their changing needs.

3. The American Dream of Homeownership is Still Alive

Despite economic uncertainty and shifting markets, the dream of owning a home remains strong. 75% of Americans still see homeownership as a key part of achieving financial success, and 87% of buyers purchase homes for long-term wealth-building. That means that even when the market seems tough, people are still motivated to buy.

For agents, this means steady demand—even in fluctuating markets. Homeownership is a profoundly emotional and financial goal, and it provides you with ongoing opportunities to help clients reach their dreams.

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4. Expanded Mortgage Programs Open Doors for More Buyers

There are more mortgage options available now than ever before. Programs like FHA loans (which require lower down payments) and VA loans for veterans, combined with USDA loans for rural buyers, are opening up opportunities for a broader range of people to buy homes.

We also see more low-down-payment conventional loans and down-payment assistance programs offered at the state level, making homeownership more attainable for first-time buyers. This gives agents more flexibility to match buyers with the right financing options and helps turn interested shoppers into homeowners.

Here's how to find programs in your state and city: https://www.hud.gov/buying/localbuying

NerdWallet.com also has a search widget for finding special financing programs, including those for rehab, flips, first-time buyers, and more.

5. New Construction is Booming

Builders are working hard to meet demand, which is good news for buyers who’ve struggled with limited inventory. In 2024, 1.5 million new homes are expected to be completed, increasing to 1.7 million by 2025 and 1.8 million by 2026. According to Freddie Mac, by 2028, we could be looking at 2 million new homes hitting the market annually.

This growth in new home construction will ease inventory shortages and give buyers more choices. With builders offering incentives like rate buydowns or upgrades, new homes are becoming even more attractive to buyers.

6. Projected Home Sales Growth: A Steady Climb

As interest rates dip and buyer demand increases, we can expect steady growth in home sales over the next decade. Here’s what the projections look like:

  • 2024: 4.2 - 4.48 million homes sold

  • 2025: 4.5 - 4.75 million homes sold

  • 2026: 4.8 - 5 million homes sold

  • 2027: 5.1 - 5.25 million homes sold

  • 2028: 5.3 - 5.5 million homes sold

These numbers show a steady climb in sales, which is great news for agents looking to grow their business and close more deals in the coming years.

7. Commission Growth: More Sales, More Income

With rising home sales comes an increase in commissions. Based on an average commission rate of 5-6%, here’s a breakdown of what total commissions could look like over the next five years:

  • 2024: $240 - $268 billion

  • 2025: $255 - $285 billion

  • 2026: $270 - $300 billion

  • 2027: $285 - $315 billion

  • 2028: $300 - $330 billion

As the housing market grows, so will your earning potential. The opportunity for real estate agents to increase their income is on the horizon.

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A Bright Future for Agents

The bottom line? The housing market is on the upswing, and real estate agents are in a prime position to take advantage of what’s coming. With interest rates expected to drop, new buyers entering the market, and plenty of inventory on the way now is the time to get excited about the future.