Inventory and interest rates top the list of factors that will need to improve for a robust residential real estate market to emerge in 2025, in the wake of another challenging year for agents and brokers, as well as their clients.
While 2024 was difficult at times, especially as the industry grappled with widespread changes, most agree that residential real estate in the last 12 months was stronger than in 2023. And there are signs that 2025 may see continued improvement. Most real estate economists predict a series of interest-rate cuts this year. Traditionally, housing transactions climb in the year after an election. And, in another signal that things could be turning a corner, existing-home sales increased more than 6% in November, the largest jump in more than three years.
What’s the outlook for the coming year? Four real estate industry titans — Kamini Rangappan Lane, president and CEO of Coldwell Banker Realty; Amy Lessinger, president of RE/MAX; Mike Miedler, president and CEO of Century 21 Real Estate; and Robert Reffkin, founder and CEO of Compass — shared their insights on the year ahead.
“We are seeing momentum heading into the new year, as buyers who waited until after the election enter the market,” Reffkin said. “Transactions have increased in the year following 10 of the last 11 presidential elections.”
Inventory needs
The U.S. is lacking about 4 million homes, and it will take time to put a dent into that deficit. In the meantime, high demand and short supply mean escalating prices, often forcing would-be first-time buyers to rent instead of purchase a home.
Lane places inventory at the top of her wish list for the coming year.
“We are definitely in a place where we are continuing to feel the effects of the decline in building after the 2008 financial crisis and the lock-in effect after COVID,” Lane said. “I think we need more inventory to come online, and that plays into an overall dynamic that needs to shift, which is just more housing accessibility.”
There’s optimism, at least from builders, that things could be moving in the right direction. Builder confidence increased every month from September to November, and the December Housing Market Index from the National Association of Home Builders showed that sales expectations in the next six months reached their highest level since April 2022.
“On the supply front, we’ve struggled with this for a long time to meet the demand for homes,” Lessinger said. “We simply need more construction of entry-level homes, where demand is highest.”
Ramping up homebuilding is easier said than done and requires cooperation from zoning and government officials. Supply chain and materials costs are also crucial, and there is some uncertainty about how Trump administration tariffs might affect homebuilding. Trump has proposed opening up some federal land for new construction, which could help meet rising demand, depending on the details.
“The incoming administration has said it will address housing affordability by increasing the construction of new homes, opening up federal land for housing construction and deregulating barriers to affordable housing, which can lower the building cost,” Reffkin said. “That will help, but it will take time.”
Miedler said the lack of housing supply means many homes that hit the market sell at or above list price and are under contract within a few weeks of listing. Engaging with policymakers is the best way to address the issue, he said.
He supports legislative efforts from both sides of the aisle to create housing inventory, including providing grants to state and local governments pursuing planning and zoning reform, incentives for local governments and nonprofits to acquire rural land for new development, and increasing tax incentives to return inventory to the market.
“When it comes to creating new inventory, there continue to be a number of barriers beyond cost, including outdated zoning practices that limit the ability to develop new housing on available land in many municipalities,” Miedler said. “As an industry, we need to work closely with governing bodies to address these issues head-on.”
Interest rates
If inventory is one of the two major pillars of a stronger real estate environment in 2025, the other is interest rates.
The Federal Reserve Board has indicated it likely will cut interest rates in 2025, which often coincides with a drop in mortgage rates, but not always. In December, Agent Publishing posted results from a survey of real estate professionals in eight markets across the country. More than 80% of those surveyed expect that mortgage rates will decline in 2025, and more than half said it would take rates in the fives to motivate sellers to move.
“I think interest rates need to stabilize or decrease in order to make homeownership more accessible,” Lessinger said. “I think the high rates have really dampened buyer activity, especially for first-time homebuyers. So, I think a more favorable lending environment will definitely help to boost demand. Ideally, we’d like to see rates get under that 6.5% arc. We really see an increase in activity in that range, and I think that would have a great impact on both demand and inventory coming into the market.”
Lessinger said RE/MAX’s research indicates that interest rates will start to trend downward, and that it’s only a matter of time before that takes place. Sellers are expected to play a big role in the shift.
“I think, if and when that lowering begins, that buyers and sellers will jump in and take action,” Lessinger said. “So many of them [sellers] have been waiting on the sidelines, locked in with their rates. As those rates come down, even if just a little, they may find that window where they say, ‘OK, now is the time,’ because life does march on. It’s always influenced by life and financial changes. We believe that more sellers are expected to get into the market in 2025, which I think would, in turn, help the market in many, many facets.”
Mortgage rates have been in the sixes and sevens since mid-2022. In September, after the Fed cut rates for the first time in four years, the average 30-year, fixed mortgage rate dropped to 6.08%. It has slowly climbed into the high sixes since then.
Lane hopes that anticipated rate cuts help bring more people into the market as more homes become available. She sees affordability as a major obstacle to many buyers.
“I think there is anticipation of additional rate cuts in 2025,” Lane said. “It remains to be seen how much of an impact that actually has on mortgage rates. I think there’s been some disappointment with the impact that the latest couple of rate cuts have actually had on mortgage rates themselves. I think if we see additional rate cuts, that would be a good thing to lower mortgage rates. The combination of more inventory and rate cuts should increase housing affordability.”
“I think that is one of the biggest issues,” Lane continued. “We are in, I think, the lowest housing affordability since 1985. I think that that’s one of the biggest issues that we have. And the other thing is we just overall need more people to have access to real estate.”
Building momentum
Miedler stresses the importance of lobbying in Washington, D.C., for pro-housing and pro-agent policies to bring about favorable conditions to continue the momentum the market picked up in the closing months of 2024. “It is very promising to see a renewed focus in Congress on housing issues as senators and representatives are hearing from their voters about how increased housing costs impact their lives,” he said.
For Reffkin, acquisition and expansion is clearly part of his strategy at Compass. In the latest move, announced in December, the company announced plans to acquire @properties and Christie’s International Real Estate. The deal is worth a reported $444 million, with closing expected in early 2025, giving Compass a global footprint.
“This partnership will allow us to empower strong independent brokerages and broker-owner entrepreneurs around the world who are affiliates under Christie’s International Real Estate,” Reffkin said. “Our companies share the same passion for empowering entrepreneurial agents. Together, we will be able to provide unparalleled resources and support to help everyone succeed and deliver exceptional client experiences.”
Reffkin has also taken on the Clear Cooperation policy by the National Association of REALTORS® (NAR). The NAR policy requires individual homeowners represented by Realtors to list their homes on the MLS and be publicly marketed. As days on the market increase, it can hurt a home’s value. Builders, meanwhile, do not have to abide by those same rules, and it creates an uneven playing field, according to some. A change in that policy would add fuel to the housing market, many believe.
“In my opinion, the easiest way to create more inventory in this country is to take away the risk of listing your house — days on the market and price drop history,” Reffkin said.
Lane thinks 2025 is going to be an interesting year for buyers, following several years of a seller’s market. During the second half of 2020 and 2021, homes in some locations spent less than a week on the market. In those cases, buyers did not have much negotiating power at the closing table.
“I think what we’re seeing for 2025 is a loosening of the lock-in effect, to some degree, at least more than in 2022 and 2023,” Lane said. “We are seeing some increase in inventory, and we are seeing increases in days on market. That means that while we still aren’t at a balanced market, we are shifting away from a really concentrated seller’s market. Now, if that continues to happen, and if rates stabilize, then inventory will rise and buyers will have more power and more negotiating power at the closing table.”
What should agents do?
Miedler recommends agents prospect, keep a client-centric approach, understand today’s consumers, adapt and learn, and get involved locally in order to succeed in 2025.
“Whether it’s making your voice heard with local policymakers to advocate for today’s homebuyers and sellers or stepping in to support your community when they need it most, your involvement at the local level will help build relationships and trust that will ultimately drive your future business,” he said.
Miedler also emphasized the importance of reaching out to homeowners aged 55 and older, who have amassed equity for years, have the highest rates of homeownership and, in many cases, have already paid off their mortgages.
“We must remember that nearly 40% of U.S. homeowners are mortgage-free,” he said. “By talking directly to this group, we would learn about their dreams and plans. At the same time, we might be able to get them to understand local housing conditions, how much equity they have amassed and provide them with market insight in the communities they might be interested in. This could be the education needed to help them consider a move which would create needed inventory.”
Lane expects agents who focus on providing professional-level service for their clients to thrive in the new year.
“That is what our industry needs right now,” Lane said. “We are in a renaissance in our industry. We have an incredible opportunity to go back to focusing on the fundamentals of what it means to be a real estate agent, and that is providing exceptional service, being a trusted advisor to your clients in the most important financial and emotional transaction of their lives.”
A real estate professional who can be a trusted advisor and can provide service in other ways can expect to do well, Lane said.
“Whether it is being the financial counselor to help them understand what their budget really is and whether or not they should sell or how much they should sell for, or what they should think about in terms of a monthly mortgage,” Lane said, “real estate agents that are prepared to deliver that level of service are going to thrive in ’25.”
EXPERT SOURCES
Kamini Rangappan Lane, President and CEO, Coldwell Banker Realty
Amy Lessinger, President, RE/MAX
Mike Miedler, President and CEO, Century 21 Real Estate
Robert Reffkin, Founder and CEO, Compass