2025 real estate trends, predictions

Every year, Ilyce and Sam offer their readers New Year’s resolutions for homebuyers, sellers and their personal finances. This year, they’re adding some trends and predictions for 2025.

As we move into the beginning of the second quarter of the 21st century, it’s interesting to see how real estate (and the world) has changed.

Twenty-five years ago, Google was a tiny company being built by two Stanford Ph.D. students. Most of the world was concerned about the Y2K bug, which was expected to cause widespread computer and network issues — but didn’t. The human genome was sequenced for the first time in its entirety. The International Space Station became fully operational. Tiger Woods won the British Open, becoming the youngest player to win all four major championships in golf. And, the reality TV show “Survivor,” debuted.

According to the 2000 Census, the median value of a home in the U.S. was $119,600. Today, the median sales price of an existing house in October 2024 was $437,300 and the average sales price was $545,800.

In 2000, if you wanted to buy a house, you had to get in to see your agent’s listing book — literally, a phone book of black and white listings. In their office. Today, you can go online and see not only color photos and videos of a property, but how much it sold for in the past, how much the tax bill is, what school district it’s in and myriad other details. Many people buy homes sight unseen — and rely on the images and video to fill in the story.

My, how things have changed. But, there’s more change to come. Here’s a look at some of the housing trends we see coming down the pike in 2025 and beyond:

1. The housing shortage continues. According to a variety of industry observers, the U.S. housing market is short anywhere from 3 million to more than 7 million. Zillow’s economists believe the housing market is short 4.5 million homes. It isn’t just that the population of the U.S. has grown. Today’s housing stock is also aging. A portion of it needs to be replaced every year. If the housing shortage continues — as is expected — you will see home values continue to rise. At the end of the day, housing prices are subject to the laws of supply and demand.

2. Tariffs and political uncertainty could drive interest rates even higher. Most economists expect mortgage interest rates to stay above 6% through 2026. But if the incoming administration begins to layer on tariff after tariff, it could spook the bond market. That would send mortgage interest rates higher. When combined with higher home prices, that would make it even more difficult for homebuyers to afford to buy their first home.

3. People will keep working from home. Post pandemic, plenty of people found they prefer working from home. They get back commuting time. They can spend that with their families, working out, doing household chores, or just doing nothing. And, that’s changed how people think about the homes they buy.

Today, a homebuying couple will typically look for space for two home offices, so both people can work from home without tripping over each other. Formal dining rooms are less important, but if you’re going to have an open floor plan, which every house being redone on HGTV seems to have, then you’ll need home offices with doors that close for work-related conversations that require quiet and privacy.

4. There will be more talk about office buildings being converted to residential use. Big cities have a lot of empty office buildings. There’s a lot of talk about how empty office buildings can and should be repurposed into residential units. The problem is that office buildings weren’t designed as places people should live.

To remake office buildings into residential homes requires rethinking all kinds of mechanical and structural issues. Take plumbing, for example. Unless you and your fellow condo dwellers want to share a single bathroom per floor, entire office buildings will need to be replumbed. And where will you park your cars? Can the building get enough electricity to build the EV charging stations many residents want?

Beyond some of the aforementioned issues, however, office towers tend to have windows that don’t open, large floorplans without interior light wells, and other structural issues that make it expensive and difficult to convert to residential use. Older buildings (think 80-plus years old) may be easier to convert than those that are 20 to 30 years old. While we’re sure you’ll hear more about this in 2025, we’re not optimistic that many owners will take on a conversion. Instead, they’ll sell on the cheap and perhaps those developers will convert or wind up taking down the building and building new.

5. There will be more 3D printed homes in 2025, and beyond. If you haven’t noticed, 3D technology is getting really good, really fast. In 2024, a new subdivision was built at a far lower price point. ICON is currently using its 3D print technology to build three communities in Texas. They’re also allowing builders to use their technology. SQ4D built a house in 80 hours. Watching the cement pour from the spigot to build walls and floors is absolutely mesmerizing. If you haven’t watched some of the videos, take a look. You’ll see the future of home building.

6. Climate change will continue to affect housing. When the final numbers are tallied, 2024 will wind up being the hottest year since measurements were taken. It was even hotter than 2023, which held the record up until now. It will also be the most expensive with respect to natural disasters, including hurricanes, wildfires, flooding and droughts.

Whether you believe climate change is permanent or temporary, man-made or a natural cycle earth has experienced before, homeowners, landlords and tenants are all paying the price. Insurance inflation is being felt in coastal areas, inland and parts of the country that are at grave wildfire risk. In some areas, it’s difficult (or impossible) to buy homeowners insurance other than from a state’s insurance-of-last-resort fund. We expect 2025 to be more of the same.

7. Artificial intelligence (AI) will push even further into real estate. Everywhere you look in real estate, AI is fueling innovation and growth. Trulia and Zillow (owned by the same company) are using AI to enhance the user experience. “Prop-techs,” as they’re known, are exploding as OpenAI, Anthropic, Google, Amazon and Microsoft make their AI products more accessible and affordable. A few examples: Entera uses AI to help investors find, buy and operate single-family rental properties at scale; LocalizeOS helps real estate agents qualify and connect with prospective buyers; Plunk helps real estate investors by providing a comprehensive analysis of any property or geographic area. These companies have raised tens of millions of dollars, and there are countless more coming up behind them.

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(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)