Heading into 2025, real estate investors are keeping a close eye on housing market predictions and trends. Our team of real estate experts have gathered data from Hampton Roads and nationwide to bring you a 2025 Housing Market Forecast for our area and beyond.
Check out our 2024 Hampton Roads Housing Market Recap for last year's trends.
Housing Predictions we'll cover:
Will housing prices go down in 2025?
We know it’s not what prospective homebuyers want to hear, but we expect house prices in Hampton Roads to increase moderately in 2025, likely by 3-4%.
Most of this price growth is expected in high-demand cities like Virginia Beach and Chesapeake. While overall demand is cooling, we predict it will remain strong enough to keep listing prices on an upward trajectory throughout 2025. (Read on for more details.)
Will 2025 continue to be a seller’s market?
Interestingly, 2024 marked the slowest year for home sales in over a decade, as affordability challenges continued to temper growth in the real estate market.
However, we anticipate a modest rebound in 2025, with home sales expected to grow by 4-5% in 2025 year-over-year – particularly if mortgage interest rates dip again. Trends suggest significant shadow demand, with prospective buyers who have been holding off for more favorable prices or rates re-entering the market as their patience runs thin.
Will mortgage interest rates change in 2025?
In December 2024, the Federal Reserve implemented another rate cut, but it was relatively small and unlikely to have a significant immediate impact on mortgage rates. Mortgage interest rates are influenced by a variety of factors, including the 10-year Treasury yield, inflation, and unemployment rates (to name a few).
Based on insights from our real estate experts, mortgage rates in 2025 are expected to follow a similar pattern to 2024, fluctuating between 6-7%. While they are likely to remain toward the higher end of this range, a dip into the low 6% range could lead to a renewed surge in home sales.
** While we enjoy following expert insights on mortgage rates and trends, please note that we are not economists and base our analysis on industry reports and market observations.**
Will we see more houses on the market this year?
After two years of gradual inventory growth in Hampton Roads, we predict that the number of new real estate listings added to the market will increase again in 2025.
Combined with slower demand, this should result in a roughly 12% increase in active housing inventory by the end of 2025 compared to 2024. This trend will help move the market closer to a pre-pandemic “normal” supply level.
Rising inventory in 2025 will give prospective homebuyers more options and reduce competition for houses. However, homes that are priced appropriately for their location and condition are still likely to sell quickly – though perhaps with fewer bidding wars.
Where are the best places to invest in real estate in 2025?
Our investment experts are still hot on Hampton, Virginia, as one of the hottest markets in Hampton Roads. This vibrant area offers easy access to the rest of the Tidewater region and Virginia. Housing in Hampton is also more affordable compared to other investment regions like Virginia Beach. Infrastructure improvements, such as the HRBT expansion, are expected to significantly boost property values and accessibility.
Home values in Hampton are rising faster than other cities in coastal Virginia, with the exception of Virginia Beach. From January to November 2024, the median sales price for homes in Hampton increased 7.84% year-over-year – outpacing all large cities in Hampton Roads.
We’re also keeping an eye on the Oceanfront area of Virginia Beach, which has our attention thanks to exciting new developments. Popular musician and VB-native Pharrell Williams is backing the creation of a Wavegarden surf park at the former Dome site. This project has already gained significant media and tourist interest, and we’ll be watching closely to see how it impacts property values and investment potential in the surrounding neighborhoods.
Will the housing market crash in 2025?
Given current housing market trends, a market crash in 2025 is highly unlikely. While demand has cooled due to rising mortgage rates, we must consider the impact of “shadow demand”. Affordability challenges have sidelined many potential buyers, but they are poised to re-enter the market as soon as interest rates drop.
With three generations actively driving homebuying demand – Gen Z, Millennials, and downsizing Boomers – demographic trends indicate that demand will remain strong through at least 2026.
According to HousingWire, even in the event of a major recession in 2025, it would take about 9-12 months for housing market inventory levels to reflect significant changes. Without another economic catalyst, we do not expect a surge in inventory or a crash in home values in the coming year.
Bonus: Why haven’t house prices crashed yet?
In our Hampton Roads 2024 housing market recap, we noted that listings on the MLS are on the rise, and demand has started to cool off in response to high interest rates. So, why haven’t housing prices crashed?
Let’s consider this on a national level. Since 1942, home prices have only decreased twice: a modest 1% decline in 1990 and during the major economic recession of 2007-2011.
Historically, home price declines are rare, and the current economic landscape is vastly different from 2008. Back then, the market was flooded with distressed sellers and risky loans. Today, we’re in a much stronger position.
As we move into 2025:
Unemployment remains significantly lower than in 2008.
The economy shows strength through GDP growth, wage increases, disinflation, and higher consumer spending.
Homeowner equity is robust, with 40% of homes in the U.S. owned without a mortgage and many fixed-rate mortgages carrying manageable interest rates below 5% (as of the end of 2024).
High interest rates have cooled demand in this “post-pandemic era.” 2024 saw the fewest home sales nationwide in over a decade. That has allowed inventory to grow at a healthier rate, helping rebalance the supply and demand of the housing market.
Read our full breakdown of 2024’s housing trends and statistics here.
A Healthy Housing Market is Balanced - A stable housing market relies on relatively consistent inventory. When supply drops rapidly – as it did during the pandemic – prices skyrocket because demand outpaces availability. Conversely, when inventory surges too quickly – like during the 2008 crash – home values decline, causing widespread economic ripple effects.
While supply is finally increasing, demand is still strong enough to quickly absorb well-priced properties. As we head into 2025, the housing market is in its healthiest state in years – though buyers may still face challenges.
The Bottom Line
As we move into 2025, the housing market will likely be shaped by interest rates, inventory levels, and the broader economic climate. While affordability challenges may persist, strong national demographics point to sustained demand for housing. Closely monitoring key economic indicators, especially those tied to the job market, will be essential for anticipating potential shifts in the housing market.
A market crash in 2025 seems unlikely. Instead, we’re optimistic that the year will bring a slower pace, increased inventory, and progress toward a “pre-pandemic normal” – fostering a healthier housing market for all.