The 2024 housing market was unpredictable.

Economists at the multiple listing service Bright MLS expected a busy market and for home prices to soften this year. But that hasn’t been the case across the Mid-Atlantic.

Sales have been slower than expected — nearly flat compared to last year. And home prices grew rapidly. In the Philadelphia region, the median sales price in 2024 is expected to be 9% higher than last year, according to Bright MLS. That’s well above the price growth across the Mid-Atlantic and in its other major metros.

Now, at the end of the year, Bright MLS is making its predictions for 2025. Next year, the Philadelphia area should expect more homes on the market, more home sales, and higher home prices, though the area’s median sales price shouldn’t grow as much as it did in 2024.

But economic uncertainty — such as economists’ prediction that President-elect Donald Trump’s stated policies on tariffs and immigration would drive up inflation — could keep homebuyers and sellers guessing.

The multiple listing service’s forecasts are based on analyses of data from the National Association of Realtors, the government-backed mortgage buyer Freddie Mac, and the U.S. Bureau of Labor Statistics.

Why were forecasts for 2024 off?

Predicting what the housing market will do is difficult in normal times. And that’s not where we find ourselves. There are “wild cards that preempt fundamentals,” said Lisa Sturtevant, chief economist at Bright MLS.

“Nothing is operating as normal after this pandemic,” she said. Its effects “are lingering much longer than anybody thought.”

The drop in mortgage interest rates early in the pandemic has “seized up the housing market,” she said. Inflation was stubborn, so the Federal Reserve avoided robust cuts to its benchmark interest rate. Mortgage interest rates stayed higher for longer than expected.

That has kept homeowners who are sitting on low mortgage rates from selling because they would have to buy at higher interest rates. And elevated rates have kept some buyers from entering the market.

So home sales this year have been flat in 2024 instead of experiencing a boost compared to last year.

Economists at Bright MLS and elsewhere had expected the average rate to sit at around 6% by the end of this year. Instead, the average rate for a 30-year fixed-rate mortgage has been hovering around 6.8% for the last few weeks, according to Freddie Mac.

Adding to the affordability problem, home prices are still rising faster than expected. That’s partly because there’s not enough housing supply to meet demand and partly because people who are selling another property or have higher incomes have been driving up prices.

How’s affordability looking for 2025?

Homes got less affordable throughout 2024, and affordability will remain a major roadblock for homebuyers in 2025.

The Philadelphia metro is one of three Mid-Atlantic metros — along with Baltimore’s and Washington’s — where the median sales price is expected to increase by more than 4% in 2025. In the Philadelphia region, the median price is forecast to be $392,230 next year.

The expected increase in housing supply will keep prices from rising as quickly as they did this year. But no major price decreases are expected in any Mid-Atlantic market in 2025.

The Philadelphia region’s price growth is driven by its attractiveness as a housing market and its limited housing supply, which will remain too low to meet demand, Sturtevant said.

Mortgage rates will likely be volatile throughout 2025. Sturtevant expects mortgage rates to come down a bit, but the average rate will likely still be between 6% and 7%, she said.

But she said she doesn’t think rates need to come down as much as people think in order for buyers and sellers to enter the market.

“People are selling their homes because life happens,” and they need to move for various reasons, such as having children or moving near family or work, she said.

More home supply in 2025

Those life events are driving up new home listings. The supply of homes on the market has been growing in 2024 and is up from the historic lows of a few years ago.

The Philadelphia metro area is expected to have 9,974 active home listings by the end of this year. That would be an increase of more than 14% compared to the end of last year.

Bright MLS predicts that the region will have 11,219 active home listings by the end of 2025, which would be a 12.5% increase from this year.

More home sales expected in 2025

Home sales in 2025 should be higher than in 2024 because more homes should be hitting the market, and there are “a lot of people that have been waiting and waiting and waiting [to enter the market], and this is gonna be the year,” Sturtevant said.

There’s both pent-up housing supply and pent-up demand. The latter will be up against a lack of affordability, especially for a lot of first-time buyers.

However, in the Mid-Atlantic, 40% of buyers are purchasing for the first time, Sturtevant said. “First-time buyers [here] are making it happen more than in other markets,” she said.

She expects that in urban hubs such as Philadelphia and Washington, mandates for workers to return to offices should help fuel an increase in home sales.

Bright MLS predicts that the Philadelphia metro area will have 70,360 home sales in 2025, which would be an 8.4% increase from the prediction for 2024.

Home sales will stay below pre-pandemic levels across the Mid-Atlantic, Sturtevant said.

©2024 The Philadelphia Inquirer, LLC. Visit at inquirer.com. Distributed by Tribune Content Agency, LLC.