Mortgage rates at 6 percent are expected to be the ‘new normal’ next year.
The National Association of Realtors (NAR) listed housing markets in the United States expected to perform well next year, noting that financing conditions in these regions are “favorable” for buyers.
Among the top 10 housing markets for 2025, the southern United States led with four markets, and the Midwest with three, according to a Dec. 12 statement from the group.
“Important factors common among the top performing markets in 2025 include available inventory at affordable price points, a better chance of unlocking low mortgage rates, higher income growth for young adults, and net migration into specific metro areas,” said Lawrence Yun, chief economist at NAR.
The hottest markets for 2025, according to the company, are:
- Boston-Cambridge-Newton, Massachusetts-New Hampshire
- Charlotte-Concord-Gastonia, North Carolina-South Carolina
- Grand Rapids-Kentwood, Michigan
- Greenville-Anderson, South Carolina
- Hartford-East-Hartford-Middletown, Connecticut
- Indianapolis-Carmel-Anderson, Indiana
- Kansas City, Missouri-Kansas
- Knoxville, Tennessee
- Phoenix-Mesa-Chandler, Arizona
- San Antonio-New Braunfels, Texas
“All areas offer a favorable financing environment—either with lower proportions of locked-in homeowners or lower mortgage rates. In addition, most of these markets outperform the national average in at least six of NAR’s 10 criteria,” the association said.
“Locked-in” refers to homeowners with low mortgage rate loans who are disincentivized from selling properties amid the current higher rates.
The 10 criteria included various critical factors that affect property prices in a market, such as home price appreciation, the share of households that hit homebuying age over the next five years, growth in jobs, and the proportion of millennials who rent homes and are in a financial position to purchase a home.
NAR expects mortgage rates to be about 6 percent next year, becoming the “new normal” that triggers more buyers to enter the market. Home prices are predicted to grow by a slower 2 percent rate. Inventory levels are expected to increase.
“Home buyers will have more success next year,” Yun said. “The worst of the affordability challenges are over as more inventory, stable mortgage rates, and continued job and income growth pave the way for more Americans to achieve homeownership.”
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