Over the next five years, the housing market is likely to see some big changes. And real estate investors need to pay close attention. In this article, we’ll give you a synthesized and actionable rundown of 25+ housing market predictions for next 5 years (2025-2029). But before we delve in, here are the top three trends that are expected to shape the U.S. housing market over the next five years.

• Stable and slow-paced housing market: The national average annual appreciation rate would hover between 3-5%, much lower than the boom years of 2020-2023. That is, there will be moderate growth and no major surprises.
• High interest rates: Mortgage rates are expected to stay high for a while, with the 30-year fixed rate hovering between 6.5% and 7.5% through 2027, and potentially dipping to 5.5%-6% in 2028-2029.
• Strong rental market: As a result of high home prices and high mortgage rates, potential home buyers will have a hard time affording homes. This means rental demand will be robust through 2029. But because of the oversupply of apartments across the U.S., overall rent growth will be modest (2-3% annually). Over the next five years, we’re also likely to see single-family rentals outperforming apartments.

These housing market predictions for next 5 years are not just random guesses. They are based on careful research and analysis, incorporating insights from real estate market experts. Understanding them will equip you as a real estate investor in the U.S. housing market to strategically plan your acquisitions and dispositions, maximize your returns and reduce risks. 

Our predictions are based on a solid, multi-faceted analysis of housing and economic data from top-tier and trustworthy sources like the National Association of Realtors, Fannie Mae, CoreLogic, Zillow, and Redfin. Additional expertise from co-founder Kathy Fettke has been factored in. You’ll find her in-depth analysis and forecasts for the 2025 housing market here.

Predicting the housing market can be challenging due to constant economic and demographic shifts, but by looking at current trends and expert opinion, we can arrive at informed predictions. Here are 14 housing market predictions for the next 5 years. We’ve also included actionable takeaways for investors based on some of these housing market predictions. 

The housing market is expected to experience low to moderate growth from 2025 to 2029. Fannie Mae’s survey of over 100 housing experts in Q4 2024 showed that most experts believe home price growth will continue to slow down. The consensus view in their real estate forecast for next 5 years is that national home price growth will decelerate to 3.8% in 2025 and 3.6% in 2026. This is a slowdown compared to the 5.2% growth in 2024.  

Similarly, CoreLogic’s year-over-year forecast of home prices from December 2024 to December 2025 indicated that prices would grow by 4.1%. J.P Morgan also corroborated this slow growth prediction. They forecast an average U.S. home appreciation rate of 3% for 2025.

While around 80% of the experts surveyed by Fannie Mae believe that home price growth will slow due to factors like high mortgage rates, increased housing inventory and slow wage growth, the housing market is still expected to see some growth. 

This growth, averaging 3-5% annually (lower than the annual appreciation rates from 2020 to 2024), is going to be slightly above the expected rate of inflation. 

This indicates that there will be stable growth in home prices over the next few years. So we’re not looking at a boom or a bust, but a slow and steady rise in home values. Specifically, if national economic growth remains strong, over the next five years (from 2024 to 2029), we might see a 17% total increase in home values.

However, you should understand that regional variations will play out. So, if you were making decisions based on appreciation rates, you’d want to consider your specific market. Certain regions, for example, small, affordable metros in the Midwest, may experience appreciation rates slightly higher than 5%, while others will see rates fall below 3%. 

If you’re investing in real estate or plan to invest between 2025-2029, don’t expect massive capital gains from appreciation. Instead, your main goal should be to secure properties that will reliably produce rental income. Right now, appreciation is a bonus, but cash flow is king. This means you want to look for properties in growing markets with consistent tenant demand to ensure steady cash flow. 

You could also boost returns through improvements or renovations that increase property value. This approach combines forced appreciation through improvements or rehabs (that meet R.E.A.L Income property standards) with market appreciation.

The NAR’s housing price forecast is a little more conservative, offering a perspective on future home prices. It projects that home prices will reach $410,700 in 2025, a 2% increase from 2024. Between 2025 and 2026, the NAR expects another 2% growth in home prices to $420,000. This is similar to the median home price forecast of $426,000 for the second quarter of 2026 by Statista. 

With strong job growth (2 million per year in both 2025 and 2026), more Americans are feeling confident and ready to enter the housing market. And we’ll likely see the housing market continue to grow, albeit marginally between 2025 to 2029, as the economy continues to thrive.

But the issue is the sustainability of these increases. If home price growth continues to outpace wages, it’s going to create a significant affordability problem. 

Lawrence Yun, chief economist of the National Association of REALTORS®, said: “The strong price increases cannot be sustainable for another five years, or America will be divided … with only a few getting to experience the tremendous housing wealth. If we bring more supply to the housing market, home price increases will not be as outrageous … and will be more in line with wages.” This underscores the critical role of supply in shaping the real estate forecast for the next 5 years.

So while the affordability crisis seems inevitable, states and local governments are pulling the one lever they can pull (increased supply) to make housing more accessible and align future home prices with what people actually earn.

Some areas will experience higher home price appreciation than others. For investors exploring housing market predictions for next 5 years, prioritizing areas with strong job markets, desirable lifestyle amenities, and most importantly limited housing supply (jobs, amenities, and scarcity) is key. You’ll find these characteristics in some Sun Belt cities and the Pacific Northwest. These areas could experience appreciation rates of 4-6% or even higher in 2025.

Conversely, areas with stagnant economies, steadily declining populations or overbuilt housing markets, would likely see slower growth or even price declines. 

Kathy says the best appreciation potential in 2025 will be in more affordable Midwest markets like Ohio, Indiana, and Tennessee, where supply is limited and demand is strong. She says Texas and Florida are still popular with investors for cash flow and appreciation, though prices and construction activity in these states have increased. 

Data from the NAR seems to back this up. The South and Midwest markets remain strong, landing on NAR’s top 10 hottest housing markets in 2025.

A significant trend shaping regional housing markets and impacting housing market predictions for the next five years is the move towards suburban and rural living. Largely fueled by affordability, it looks like this isn’t just a temporary blip but a long-term shift in demand that will impact the US housing market outlook. People are increasingly valuing the increased space and community amenities found outside of cities. This is why suburban and rural areas will see stronger appreciation compared to urban centers over the next five years.

Based on current trends as reported by CoreLogic, the Northeast has been showing strong home price growth due to low inventory, while prices in certain Southern markets are adjusting to higher inventories and high mortgage costs. CoreLogic’s recent report also showed that Midwest states like Ohio, Oklahoma, and Missouri continue to experience strong appreciation rates because of their affordability.

Between 2023 and 2024, the Appalachian region in the Midwest recorded some of the highest growth in home prices. For example, Wheeling (West Virginia and Ohio) saw a 20% year-over-year growth between November 2023 and November 2024, Johnstown (Pennsylvania) saw 16% YOY growth, and Huntington-Ashland (Kentucky, Ohio, and West Virginia) grew by 14.8%.

If you’d like to profit from both cash flow and appreciation, especially given the current US housing market outlook, you should look beyond just affordability and consider the factors that will sustain an increase in property values over time. This means you should look for markets that offer reasonable housing prices today but are also poised for growth due to factors like population growth, economic diversification, and infrastructure improvements (markets like Des Moines and Indianapolis).

Essentially, the places where property values are likely to go up the most are cities attracting a young, skilled workforce, and investing in livability improvements. See the top rental housing markets for both cash flow and appreciation in 2025.

The housing market in 2025 and beyond faces significant affordability challenges. According to Kathy, “housing affordability is a major challenge in 2025, with home prices at record highs and mortgage rates doubling from recent lows (though still low historically).” She points out that right now, it’s about 50% cheaper to rent than to own and single-family rents have increased faster than apartment rents due to a lack of supply.

The double whammy of high prices and high mortgage rates is making home buying significantly harder. 

In January 2025, mortgage rates exceeded 7%, their highest level in seven months. That month, the typical mortgage payment reached a high of $2,290. This makes it cheaper to rent than to own in many markets today. And even though prices have slightly decreased in some areas (particularly in the south) as construction completions and seller volume increase, these small adjustments offer no major relief against the backdrop of high mortgage rates.

House price predictions for next five years hinge on policy and market dynamics. There are speculations that Trump’s proposed policies, such as those related to zoning and immigration could have mixed effects on housing market affordability. 

Streamlining zoning approvals and making federal land available for new housing construction will address the issue of limited housing supply. But his stance on reducing immigration to decrease housing demand is likely to have the unintended effect of cutting labor supply in the construction industry. 

Current mortgage rate trends suggest that over the next five years, mortgage rates could remain elevated. Rates will range between 6.5% and 7.5% for much of 2025 to 2027 before potentially dipping towards the end of 2028-2029. Between 2028 and 2029, mortgage rates could potentially come back down to a more manageable range, around 5.5% to 6.0%.

These elevated rates, driven by economic factors like inflation and potential economic growth, will likely slow down the housing market recovery and exacerbate affordability issues.

Many people expected rates to start declining in Q1 2025 with the Fed’s projected rate cuts. But they’ve gone even higher, due to the recent surge in the 10-year Treasury yield. Even Fannie Mae adjusted their rate forecast for 2025 and 2026 upwards. They expect mortgage rates to close 2025 at 6.5% (from a previous forecast of 6.2%) and 2026 at 6.3% (from the previously forecasted rate of 6%).

The Federal Reserve projects stronger-than-expected economic growth over the next couple of years, and would likely maintain higher interest rates to keep inflation under control. The impact of these elevated rates is weak housing demand due to affordability issues. 

Overall, you should prepare yourself for a new normal when it comes to mortgage rates. While rates are currently high (but still historically low, as Kathy notes), their future trajectory is highly uncertain. This means house price predictions for next 5 years would also have a high degree of uncertainty. The Federal Reserve’s dual mandate of price stability (2% inflation target) and low unemployment (around 4.2%) is close to being achieved, but these are not the only things to watch. 

Kathy says that “future rate cuts or hikes will depend on the policies of the new administration and the state of the economy, such as the impact of tariffs on inflation.” So it appears the decisions of the new administration and the overall economic performance will strongly influence whether rates go up, down, or stay relatively stable over the next five years.

While high mortgage rates present affordability challenges, they also create a significant opportunity for real estate investors. Because fewer people can afford to buy, more people will need to rent, increasing the demand for rental properties.

The increase in the cost of borrowing means that your operating costs will be higher. This necessitates optimizing your financing strategies and focusing on properties that generate strong cash flow. 

You should consider ways to reduce your borrowing costs, such as making larger down payments, improving your personal credit score, or exploring alternative financing options like private lending or seller financing. You should also build cash reserves to cover unexpected expenses and vacancies. 

Moreover, to offset increased borrowing costs, you want to invest in properties that can generate strong cash flow. You can also add value to properties through renovations. This allows you to potentially raise rents and improve your cash flow. RealWealth now allows you to view pro formas and the cash flow potential of rental properties for sale across the U.S. for free. Click here to view properties. 

We might see a slower pace of Fed rate cuts in 2025 than earlier expected. The Federal Reserve plans to keep interest rates relatively high (resulting in mortgage rates in the 6-7% range in 2025) due to concerns about high inflation and government debt. And with steady economic growth (though sluggish), there’ll likely be no aggressive rate cuts for the foreseeable future.

Inflation has continued to marginally exceed the Fed’s target of 2%. In January, the Consumer Price Index (CPI) rose by 3%. This was primarily fueled by a 0.4% increase in shelter costs. With persistent inflation, the Fed isn’t motivated to cut rates. So, it looks like we’ll be dealing with higher mortgage rates for a while.
The Federal Open Market Committee (FOMC) projects only a 50 basis points reduction in interest rates for all of 2025, half of what was previously anticipated.

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The major reason for this cautious stance on interest rates, according to the FOMC statement of January 29, 2025, is that the economy is growing solidly, and the unemployment rate has stabilized at a low level. The job market is also robust, which supports increased consumer spending and steady housing demand. So unless the economy shows signs of overheating or entering a recession, there would likely not be rapid rate cuts. 

Conversely, the uncertainty and potential cost increases that may be caused by President Trump’s increased tariffs could lead to decreased consumer spending. So it’s hard to definitively predict the trajectory of mortgage rates right now.

As fixed rate mortgages (FRMs) become more expensive, borrowers (particularly those in areas with higher property values) are turning to ARMs for their lower initial rates. The share of ARMs, which hit a 10-year low of 4% of all mortgage originations in January 2021 rose to 15.5% in May 2024, the highest percentage for the year.  

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However, while Adjustable-Rate Mortgages (ARMs) might seem like an attractive option right now, especially with their lower initial rates, you need to be cautious and consider the potential risks down the line. You should be prepared for the possibility of rate resets in the future. For instance, many people who took out 5-year ARM loans between 2022-2024 might face rate resets between 2027-2029 which would impact their monthly mortgage payments. 

While the share of ARMs has generally increased, Corelogic’s data shows that ARMs are more prevalent in areas with higher property values, where people take out larger loan sizes. This is understandable as the larger the loan size, the more attractive the initial savings you get from ARM loans.

Due to the inherent risk of rate resets and their role in the 2006 housing crash, ARM loans have waned in popularity over the years (down from 40% of new mortgages in 2005 to about 10% in 2024). So while there might be a slight increase in ARM adoption due to current economic conditions and the appeal to certain demographics (like younger buyers), fixed-rate mortgages will continue to be the popular choice for homebuyers between 2025 and 2029.

There’s no universally “best” mortgage type for investors; the right choice depends on your specific investment strategy (for how long do you plan to hold on to the property?) and risk profile (how much risk are you comfortable with?). 

If you’re in it for the long haul and want stable cash flow from rental income, you should probably stick with a fixed-rate mortgage to avoid the risk of unexpected payment increases. Even though ARMs might offer lower initial rates right now, if you want long-term stability and steady cash flow, then you should opt for a fixed-rate mortgage. 

But if you’re a short-term investor (e.g. if you plan to sell or refinance within a few years), then an ARM might be the better option for you.

While housing inventory is improving, it still falls short of pre-pandemic levels and historical norms. In her presentation, Kathy pointed out that “housing inventory has increased by 27% in 2024 compared to the previous year but is still below pre-pandemic levels and far below the oversupply seen in 2008-2009.” She said “there is a projected need for 18 million new homes over the next 10 years.” 

Between 2022 and 2023 alone, 1.7 million new households were formed. Apart from this, experts at John Burns Real Estate Consulting say between 2023 and 2033, there will be 2.3 million housing tear-downs, and 500,000 new second homes. With the millennial population, which is now at prime first-time home-buying age, driving demand, the housing market is expected to remain competitive over the next few years.

Although housing inventory is showing signs of improvement (up to 3.5-months of supply in January 2025 from a record low of 1.6 months in January 2022), there’s still a huge gap between supply and demand.

There’s reason to believe housing inventory will improve between 2025 and 2029, but we’re not going back to the inventory levels seen in previous decades (at least for now). High financing costs would lead to slower home sales and longer days on the market. This would discourage sellers who have already locked in low 4% rates. 

So despite the trend of increasing year-over-year home sales, sales are historically low. JP Morgan reported that “as of January 2025, single-family existing homes for sale were up roughly 20% year-over-year, but the number was still near record lows, around 20-30% below prior troughs.”

And while new home construction is thriving, factors like supply chain issues, labor shortages, and land availability might limit the extent to which it impacts the overall housing inventory.

As an investor, the takeaway is that while the market might be slightly less tight, you should still expect competition for homes, especially desirable homes in solid markets. Therefore, if you’re a real estate investor, you should prioritize off-market strategies to find deals. View off-market listings and proformas here.

To address the housing shortage, builders have ramped up new home construction over the last couple of years. We can expect to see this strong construction activity continue in 2025. Single-family construction, which has previously lagged behind, is picking up steam. Single-family construction spending is projected to grow by 13.1% in 2025 and 12.4% in 2026. 

To ease the tight housing inventory situation, new construction is definitely going to be a key player. But right now, there is a glut of available new homes for sale that needs to be absorbed. The current supply of new homes is around 7.3 months, which is on the higher end of historic norms. 

JP Morgan’s research revealed that as of January 2025, there are about 481,000 units of new homes for sale, the highest level since 2007. Similarly, speculative (spec) homes for sale are at 385,000, the highest since 2008. This supply glut is leading to price declines in some markets, but builders do not seem deterred. 

In fact, we might see more housing starts over the next five years, according to the CBO. They project that housing starts will increase to an annual average of 1.68 million units from 2025 to 2029 before declining to 1.52 million per year. This level of construction is far above the past decade’s average of 1.3 million per year, and the 40-year average of 1.37 million per year

Realtor.com’s projection of a 13.8% increase in new construction activity between 2024 and 2025 supports this. But its own estimate is more conservative. It projects that 1.1 million new homes will be built in 2025 (13.8% higher than 2024), most of these being smaller homes priced below $300,000.

The build-to-rent trend is gaining momentum in the U.S., and it’s likely to continue growing as a response to the affordability crisis. Kathy says: “With home prices and interest rates making homeownership less affordable, many people are forced to rent. The build-to-rent trend is growing as a response to this demand, providing newly constructed homes for rent.” 

With many people, especially younger generations, priced out of home ownership, and housing affordability falling to its lowest level since the 1980s, BTR communities are gaining traction by offering attractive amenities and services. 

A record 93,000 BTR single-family homes were completed in 2023, a 39% increase from 2022. Another 99,000 BTR homes were started in 2024. And this sector is expected to continue to experience exponential growth in 2025 and beyond due to rising demand from Gen Zs and millennials.

The build-to-rent market is not just growing rapidly, but also evolving. It’s no longer just for young professionals. It’s attracting a diverse range of demographics, including families and empty-nesters. This is prompting developers to design BTR communities with a wider range of floor plans and amenities to meet the needs of different demographics. 

BTR communities are especially popular in rapidly growing areas of Arizona, Texas, and Florida, where population and job growth are strong. They often come with amenities like those found in high-end apartment complexes. And they offer renters both the comforts of apartment living along with the traditional SFH attractions – community and privacy.  

With institutional capital poised to play a significant role in this sector in 2025 and beyond, build to rent housing is becoming a mainstream housing option. 

But even BTR developers aren’t immune to the pinch of high mortgage rates. Kathy adds that, “right now many builders have pulled back due to increased costs, leading to a projected supply gap in rental properties by 2026”. 

With homeownership becoming less accessible due to rising prices and interest rates, more people are turning to rentals, and you can capitalize on this trend by investing in single-family rentals and build-to-rent properties. Both of these offer investors a stable income stream and the opportunity to profit from long-term appreciation. One of the easiest ways to invest in real estate assets is through real estate syndication. See how syndications work.

Rental demand will remain strong through 2029 primarily because of underlying economic pressures. The fact that inflation and the cost of living are outpacing wage growth means that many people will find it difficult to afford homeownership, making renting the more viable option.

Although rent increases may not be as steep as in previous years, in many markets, there’s going to be steady growth in rents from 2025 to 2029.

Demographic factors also contribute to the strong rental demand. It’s not just about younger age groups (20-34 year olds) preferring renting over home ownership. But an increasing number of seniors (65+ years) are now opting for rentals for simplicity.

Specifically, the number of U.S. renter households is expected to increase by 0.9 million (1.91% growth) between 2024 and 2029. 

The substantial cost difference between buying and renting (with homeownership currently being 40% more expensive) will keep rental demand strong through 2029. Home prices aren’t expected to drastically decline within the next five years. This means that the financial advantage of renting is unlikely to change significantly. 

The rise of hybrid work also exerts its own influence on the rental property market. It’s leading to longer rental periods and increased demand for work-from-home amenities among renters.

While there’s strong ongoing rental demand, don’t expect a breakneck pace of rent growth between 2025 and 2029. As the market absorbs excess apartment supply in 2025 and 2026, overall rent growth across the U.S. might be about 1-2%. 

But Realpage forecasts a 15-20% decrease in new apartment completions across major U.S. markets by 2026. This will likely lead to a tighter rental market in 2026 and 2027, pushing rent growth to about 3% annually.

The data analytics firm Markerr forecasts that average monthly rent across the U.S. will rise from $2,103 to $2,453 between 2023 and 2028. But there will be notable regional differences. Markets with limited supply (like Cincinnati) will experience faster rent growth than others.

You should be paying close attention to supply and demand dynamics in different markets. Rent growth in markets like Dallas, Houston, and Miami might be lower right now (around 1.5% to 2.5%) due to these markets being at or slightly past their peak supply. But identifying and investing in markets that are past their peak in new rental unit supply could be a smart strategy, as long as there are solid economic fundamentals in these markets. 

By 2026, when demand starts to outpace supply, these markets are likely to experience better occupancy rates and more favorable conditions for rent increases. The point is, your real estate investing strategy should always consider future rent growth potential. 

Want a personalized investment strategy? Book a complimentary call with an experience RealWealth Investment Counselor here.

The U.S. housing market is expected to see a significant increase in apartment supply in 2025, which is going to stabilize rents in many areas. Across the country, Realpage expects that over half a million apartment units will be delivered in 2025. This massive wave of new apartments (which would be one of the highest recorded since 2008) will definitely have an impact on rent growth. However, supply delays could affect the final count.

The two largest apartment markets in the nation, New York and Los Angeles, will lead the nation in apartment deliveries. New York is expected to receive about 35,000 new units, a growth rate of 1.8%. Los Angeles, on the other hand, would receive about 19,400 new units – a 1.6% increase in total apartment supply.

The surge in multifamily supply would also be noticeable in some Sun Belt cities. Realpage forecasts that fourteen U.S. markets will receive more than 10,000 new apartment units each in 2025. Sun belt cities are among the top recipients. These include the three largest apartment markets in Texas (Dallas, Austin, and Houston), as well as Charlotte, Raleigh, Atlanta, and Orlando.

Smaller markets like Asheville, NC; Huntsville, AL; and Wilmington, NC are also expected to see significant growth in apartment inventory (exceeding 7%). Asheville will lead other smaller markets in multifamily supply. It’d potentially add 3,500 new units, equivalent to a 13.3% YOY inventory growth.

While we’ll see a sizable number of apartments completed in 2025 and the first half of 2026 (with 1.2 million units in the under-construction pipeline from September 2023 to June 2024), things are going to slow down considerably after that. 

That’s because in 2024, multifamily construction starts dropped 50% from the levels seen in 2022 and 2023. This coupled with extended development lead times indicate that we should expect to see far fewer apartments being completed in late 2026 to 2027. 

Over the next five years, the single-family rental (SFR) market is going to continue to be a strong performer, with rising demand and rent growth driven by factors like remote work and affordability concerns. 

SFR rent prices are going up faster than apartments. According to Zillow, the typical SFR rent reached $2,174 per month in December 2024, a 4.4% growth compared to the past year and 40.6% growth since the onset of the COVID-19 pandemic. For that same month, Zillow reported that the average asking rent for multifamily was $1,812, a 2.4% year-over-year growth and 26.2% over the last five years. 

On average, SFR rents are now 20% higher than apartments. That’s the largest gap ever recorded between the two residential property asset classes. 

The SFR market is becoming increasingly attractive to renters, particularly millennials, who are seeking more space and privacy for remote work, and are being priced out of the homeownership market due to high mortgage rates and sizable down payments. Single-family home construction has also been slower than multi-family.

While more landlords are offering concessions to attract renters due to a higher supply of rental units, and the supply of for-sale homes has slightly increased, it doesn’t look like it’s going to be enough to slow down the momentum of single-family rentals anytime soon.

The huge difference in rental costs between expensive coastal cities and cheaper areas in the Midwest and the South is going to lead to significant regional disparities in rental markets. Because living in those big cities is becoming so unaffordable for many people, and because a lot of us can now work remotely, people will increasingly move to those more affordable places and rent single-family homes there. 

The increased demand for single-family rentals in these more affordable regions will lead to higher rent appreciation in these markets.

Click here to view single family rental properties for sale in top markets.

The clear message is that if you’re looking for cash flow and appreciation, you need to focus on acquiring single-family rental properties, especially in the suburbs. That’s where the action is going to be. Shifting demographic trends and affordability challenges are driving demand for affordable single-family rentals. 

But for any place you plan to invest in, you should also look at jobs, company relocations, and population growth if you want a good return on your investment.

Below, we’ll explore six key predictions for the housing market in 2025

Home prices will continue to go up in 2025, but not nearly as fast as they have been. Zillow thinks we’ll see a 2.6% home value growth in 2025, which is pretty slow. That’s partly because of increased inventory. Buyers now have more choices (increased bargaining power). 

HousingWire and Altos Research are predicting slightly higher home price growth of 3.5% for 2025, while expecting existing home sales of 4.2 million. Housing authorities like Fannie Mae and the MBA predict 3% price growth. 

The NAR’s Chief Economist, Lawrence Yun, predicts that we’ll see home prices grow by just 2% in 2025. The NAR’s house price prediction for 2025 is $410,700. Then prices will increase by another 2%, to $420,000 in 2026. 

J.P. Morgan supports these low growth projections. They believe that interest rates will stay high through 2025 (around 6.7% by the end of 2025). This means fewer people will be able or willing to buy homes. They predict that home prices will grow by just 3% in 2025.

However, home prices could go higher if Trump’s proposed tariffs on Mexican, Canadian, and Chinese goods make inflation worse as interest rates stay high, or if there aren’t enough workers to build new houses. Both of these situations would negatively affect affordability. And if sales slow down because of affordability issues, that might have a downward effect on prices. 

Basically, 2025 is expected to be a year of slow growth, but there are some wild cards out there that could change things.

Mortgage rates are likely to stay above 6% all through 2025. For potential home buyers, this would make it difficult to afford a home. On the other hand, it presents opportunities for investors with cash or access to alternative financing, because there’ll be less competition from buyers and stronger rental demand.

The recent change in the Fed Reserve’s stance on rate cuts shows how hard it is to predict mortgage rate trends. Prior to January 2025, most experts expected the 30-year fixed mortgage rate to fall to the low 6% by Q1 2025. But in January, it rose above 7%. While rates are expected to come down slightly in some months in 2025, they are still going to remain above 6%. 

These high mortgage rates are going to have a big impact on the housing market in two major ways. First, it’s going to continue to be really tough for most people to afford to buy a house. In fact, a huge majority of people who don’t own homes (78%) say affordability is the biggest barrier they face. 

Second, because so many homeowners got super low interest rates in the past, they’re not going to want to sell now and give those rates up. This means there won’t be as many houses for sale. Essentially, the market will remain unbalanced.

This quote from Mark Palim, Senior Vice President and Chief Economist at Fannie Mae, summarizes the situation: “From an affordability perspective, we think 2025 will look a lot like 2024, with mortgage rates above 6 percent, home price growth easing from recent highs but staying positive, and supply remaining below pre-pandemic levels.”

More people are starting to put their houses up for sale, but the number of listings is still way below pre-pandemic levels. Existing home sales in 2025 is expected to be slightly higher (4.8%) than 2024, at around 4.25 million. But when compared to home sale numbers in 2019, it is 20.3% lower. 

Basically, there’s a recovery, but the market has not fully recovered. The reason for the limited recovery is that buying is now more expensive, and the high mortgage rates discourage a lot of sellers from listing their homes and losing their sub-4% rates (something called the “lock-in effect”). 

However, housing inventory keeps gradually improving. In the last week of 2024, there were 32,500 new listings on the market, 33% more than in the same week the previous year.

But, we should point out that even though there might be more homes for sale in 2025, it’s not because a lot of current homeowners are suddenly deciding to sell. Interest rates are still expected to be too high and people with low rates won’t want to give them up. So, most of the new houses on the market are brand-new ones, built by developers.

Homebuilders see that there’s a need for more affordable housing, and that that need isn’t being met, and they’re stepping in to fill that gap. Builders are expected to complete 1.1 million new housing units in 2025, 14% more than in 2024. This surge in construction completions will help ease the pressure on home buyers, lessening competition in many markets.

The intense competition of the last few years has dwindled significantly and it’s looking like things are starting to shift in favor of buyers. In 2025, buyers and investors will likely have more options to choose from and prices won’t be rising fast because there’ll be less competition. 
This means that there’ll be room to negotiate prices, especially in certain regional markets experiencing oversupply (like some areas in the Southeast and Southwest). Currently, 25 major metros (mostly Southern) are classified as buyer’s markets under Zillow’s Market Heat Index.

But while the housing market has shifted slightly in favor of buyers, it’s important to be realistic. We’re not yet back to the “good old days” where there were tons of houses available. The overall supply is still going to be pretty tight compared to what it used to be. 

NAR’s January 2025 numbers showed that there was just a 3.5 months’ supply of homes available across the U.S. that month, which is still low. So, while things are looking up a bit, don’t expect a huge selection and super-low prices.

Since the market is moving towards balance, you don’t have to rush into buying just anything. You can actually take your time, be picky, and find properties that really fit what you’re looking for, and at a price that works for you. You can take time to assess properties to see if they meet REAL Income Property Standards. 

And because there’s less competition and more houses to choose from, you can actually negotiate and try to get a better deal. It’s a much better environment for investors.

In 2025, alternative housing models such as co-living spaces (where people share living areas), build-to-rent communities, senior housing, and prefabricated homes (homes built in factories e.g. Boxabl units), do not just address affordability and supply issues but also offer innovative investment opportunities.

Apart from the fact that many people can’t afford traditional houses, people’s lifestyle preferences and what they want in a home are changing. This is why these alternative housing models are gaining prominence. 

These housing models provide new avenues for investment in real estate, with different risk-return profiles compared to traditional residential investments. 

There are some specific types of alternative housing that are really taking off. A big one is build-to-rent housing, which we’ve touched on before. It’s growing in popularity because it appeals to families who can’t afford to buy but still want the benefits of living in a single-family home. It’s especially popular in suburbs of major cities like Phoenix, Orlando, and Charlotte.

Student housing is also promising. The US remains a top destination for international students. Many of these new students need a new place to live. This presents opportunities for investors. In fact, the global student accommodation market is projected to grow from $11.83 billion in 2024 to $15.94 billion in 2030, with a compound annual growth rate (CAGR) of 5.1%.

To diversify your portfolio, you can explore alternative housing models like fractional ownership and syndication. In fractional ownership, you buy a portion of a property, instead of the whole thing, while syndication allows you to invest passively in real estate through a real estate fund. RealWealth currently offers syndication opportunities. Learn more here.

But people are getting really creative with rental property investing. One idea that’s become popular is “rental conversion”. This is where you take old buildings, like offices, hotels, or schools that aren’t being used anymore, and turn them into apartments. Another one is coliving, where investors buy a house and rent out each room separately. In this case, the investor nets more money and can keep occupancy at 100% for most of the year. 

Expect rent growth to be highly regional in 2025. It all comes down to the basic rules of supply and demand in each specific city or area. If there aren’t a lot of new apartments being built, and there’s strong demand, like in Chicago, Cincinnati, Indianapolis, Pittsburgh, or Kansas City, rents will probably go up by up to 4%. 

But in some Sun Belt cities, like Dallas, Houston, Las Vegas and Orlando, where they’ve been building tons of new apartments, rent increases might be smaller (between 1.5-2.5% according to Realpage). That’s because these markets have reached peak supply. And despite strong population growth, excess supply will limit rent growth.

Conversely, in some big cities like San Francisco, DC and Seattle, rents might go up (stabilizing at around 3-4%). That’s because people are moving back and occupancy levels are higher. But for the most part, rent growth will still be slow (less than 2%) across most big cities (e.g. Atlanta, San Diego, and Los Angeles).

Realpage predicts that cities like Austin, Charlotte, Phoenix, and Raleigh/Durham may not see any apartment rent growth in 2025. This is because builders in these markets have been building so many new apartments that there are now more units available than renters to fill them.

When it comes to single family rentals, the story is a bit different, depending on where you look. In 2024, the Midwest saw the highest rent increase at 5.26%, followed by the Northeast at 4.84%. The markets with the strongest rent growth in 2024, including Buffalo, NY; Cleveland, OH; Staten Island, NY; St. Louis, MO; and Louisville, KY, were characterized by affordable prices and steady rental demand. 

But rent growth has slowed down in high-cost markets like the Pacific coast and the Rocky Mountains to around 2.12% and 1.75% respectively. 

And in some Sun Belt cities, like Austin and Tampa, all the new build-to-rent houses coming to the market and the new apartment completions actually caused rents to decline a bit in 2024. The Southwest saw a slight rent decline (-0.09%) while in the Southeast, rents stabilized (0.62% growth). 

However, we might see things change a bit in late 2025 and 2026 as builders take a step back. BTR and apartment completions are expected to sharply decrease during that period.

Here are 4 key 2026 housing market predictions that rental property investors should know.

The outlook for multifamily and single-family construction in the coming years is somewhat different. On the one hand, multifamily construction is expected to decline sharply by 2026 due to factors like reduced new construction starts and prolonged project timelines. On the other hand, single-family home starts are projected to increase by the end of 2026 after a temporary dip.

After peaking in 2024, and expected to remain high in 2025 (553,613 units in 2024; around 508,000 units in 2025), Yardi Matrix says there’ll be a significant drop in multifamily completions in 2026, to around 371,000 units. That’s a 27% decline from 2025 levels. 

This is going to happen for three reasons. First, it takes longer to build these apartments now (e.g. garden-style apartments take about 689 days to complete). So some of the projects started in 2024 are extending into 2026, which is a disincentive for builders. 

Secondly, a lot fewer new apartment projects were started in late 2023 and early 2024 because of economic uncertainty and high financing costs. And third is that because builders have been too focused on specific high-growth markets, these areas are currently oversupplied. This discourages them from starting new projects. 
Single-family homes, however, are expected to increase in 2026. Fannie Mae projects that single-family home starts will gradually improve from a low point of 963,000 annualized units in Q3 2024 to around 1,065,000 annualized units by the end of 2026.

Looking further ahead, single-family home construction may sharply decline. That’s because, according to Fannie Mae, from 2026-2036, approximately between 13.1 to 14.6 million Americans aged 65+ might exit the housing market (sell their homes). This will create a surge of existing homes for sale that will reduce demand for new builds.

On top of that, building new houses is getting more and more expensive. The cost of materials is going up, there aren’t enough construction workers (and this could get worse depending on new immigration policies), and insurance is getting pricier because of climate change risks. All of this could make it even harder to build new homes, which could keep the supply of new builds lower from 2026-2028.

The fact is that it has gotten more expensive to run rental properties because operating costs have gone up. The cost of things like hiring a handyman to fix things, paying for insurance, and even just covering the utilities has doubled from what they were in 2022. And this rise in expenses comes at a time when rent increases are minimal, putting pressure on cash flow. 

Plus, if you wanted to borrow money to improve the property or buy another one, that’s going to be expensive too, because mortgage rates are expected to stay pretty high (between 5.5-7%). And it’s not all tied to the usual stuff – inflation or mortgage rates. Insurance is getting really expensive because of all the problems with floods, wildfires, and other climate-related disasters. 

In short, efficient cash flow management will become critical for investors going forward. You need a property manager or property management company that can optimize resources and streamline your operations.

I see a shift towards more efficient and tech-driven property management as a way to maintain profitability in 2026 and beyond. The challenge for property managers will be balancing keeping the properties profitable for the owners with making sure renters are still getting good service, even with all these cost pressures.

And it looks like a lot of property managers are already turning to artificial intelligence (AI) to help them solve this challenge. A good chunk of them are already using it (23%), and Appfolio says even more (30%) are planning to adopt it. AI can definitely help improve operational efficiency, which would be crucial in managing these higher costs in 2026 and beyond.

Takeaway for investors:

Getting good cash flow as an investor is now tougher. Things like insurance, property taxes, the cost of financing, and even just fixing things up are all getting more expensive, eating into your profits.

To deal with this, you have to do two things. First, you need to make sure your properties are managed really efficiently – finding ways to save money and run things smoothly. Second, you need to be smart about where you invest. Look for areas where operating costs are lower, so you can keep more of your rental profits.

We’re currently in a situation with, potentially, a few too many rental units available. But by 2026, the rental market could flip dramatically from oversupply to undersupply. 

That’s because apartment construction starts have dropped (falling 28% YOY in November 2024), while existing rental properties keep getting absorbed at a steady pace, especially in places like the Midwest and Northeast. 

And given the time it takes for new projects to be completed (with multifamily projects taking 2-3 years to complete), we could see a rapid decrease in vacancy rates and an acceleration of rent growth from 2026 to 2027.

Various economic and demographic forces are converging to keep rental demand high. High mortgage rates make buying a home less attainable, forcing more people to rent. This coupled with the fact that more young adults are forming households and leaving overcrowded living situations means that the number of renters will likely increase over the next five years.

This pressure is expected to be felt most in currently undersupplied areas like the Midwest/Northeast (e.g. Detroit). But in Sun Belt markets like Austin, where there’s currently excess luxury inventory, rent growth is going to slowly pick up as excess supply gets absorbed by late 2025.

As an investor, you need to be very selective and prioritize areas where people are moving to and where jobs are being created. Those are the places where rental property undersupply is most likely to happen, leading to higher rents and better returns on investment. And in most cases, these areas also have inherent long-term growth potential. 

Some property owners who refinanced into ARM loans at low rates in 2021 and 2022 could face financial strain in 2026 and 2027 when their ARM rates reset. 

BTIG analysts say that in the single-family mortgage market, around $550 billion in ARM loans have been issued, representing 5% of the total outstanding loans in the SFH market. Of this, $200 billion are ARM loans which would adjust to higher interest rates in the next 1-3 years. So homeowners and investors locked in at 4% rates might be facing substantial rate increases. 

“We do see higher default risk in borrowers getting pinched from floating rates resetting higher — especially those that locked fixed rates below 4%, and are now seeing rate shocks of 300+ bps (basis points). But the widespread risk isn’t nearly on the scale we saw in the 2008 crisis, where more than 20% of the market were ARMs,” BTIG analysts reported.

The good news is that most ARM borrowers have built sufficient home equity to be able to sell whenever they want to get out of their loans.

While ARM resets pose a risk to property owners who might struggle with higher payments, they also present a window of opportunity for savvy investors. 

That’s because in 2026 and 2027, investors with cash on hand will have more opportunities to acquire properties below market value from owners looking to sell.

Essentially, we might see a slight increase in resale housing inventory in 2026 and 2027 as financially strained homeowners sell properties. But this is likely not going to make much of a dent on housing inventory. That’s because ARMs still make up less than 10% of all single family home loans and many ARM holders will likely opt for refinancing into fixed-rate mortgages vs selling. 

Yet, investors will be able to find some good cash flow opportunities in markets with high ARM exposure.

As a real estate investor, you need to think beyond current market conditions, and keep an eye on long-term trends that will shape the housing market over the next 3-5 years. Here are three critical housing market predictions for the period between 2027 and 2029.

A significant demographic shift is coming. By 2033, as the large baby boomer population (69 million) crosses 70, there’ll be a sharp rise in demand for senior housing, including assisted living and nursing facilities. 

Apart from this, the U.S. senior population (80 and above) is expected to grow by more than 4 million by 2030. The upside is that many baby boomers and seniors have accumulated wealth through home equity and equities and are able to afford care services.

So as an investor, it might be a good idea to have senior housing as part of your portfolio. As of now, there’s a significant gap between demand for and the construction pace of senior housing, which could lead to a potential housing shortage for seniors. Around 560,000 new units would be needed by 2030. But at current construction rates, the market can add only 191,000 units.

However, this isn’t a simple “build it and they will come” situation. There are affordability concerns for many seniors, requiring developers to offer different low-cost options like co-housing and à la carte services. About 20% of Americans over 50 have no savings at all. And there are operational risks specific to senior housing that require careful management. So, while the potential is high, it requires a strategic and informed approach.

As we look at housing market predictions for next 5 years, we see that climate change has emerged as a critical factor when assessing real estate investments.That’s because the cost of insuring properties, especially in climate-vulnerable areas, is expected to rise substantially. 

First Street Foundation, a company that studies how climate risks impact home values, said that over the next 30 years (from 2025 to 2055), climate change could wipe out $1.47 trillion in home values. They also predicted that the cost of property insurance would rise by 29.4% across the U.S. by 2055.

This, combined with the potential for large-scale migration away from high-risk zones, will significantly impact property values and the overall attractiveness of certain markets, especially in places like the Sun Belt, which have been popular destinations. First Street predicts that 55 million Americans will relocate due to weather-related reasons over the next 30 years.

First Street highlights that climate change will substantially impact property values in the coming years. By 2055, high-risk neighborhoods (i.e. those facing “climate abandonment”) may see property values drop by up to 6.1% due to rising insurance premiums. On the other hand, climate-resilient areas, like the Midwest and parts of the Eastern U.S. may see property values rise by up to 10.8% during that 30-year period. 

Climate change is not just a distant threat, but a current reality that’s reshaping real estate markets, and as investors, we need to adapt our strategies to account for this new normal

You need to integrate climate risk assessments into your investment strategy. This involves analyzing historical climate data (looking at the frequency of events like heat waves, heavy rainfall, droughts, hurricanes, and wildfires), and evaluating the effects of these weather-related events on local infrastructure (how impactful are these events when they happen?). The point is, ignoring climate risk could lead to significant financial consequences down the line.

The supply of homes could increase in 2028, leading to a more balanced market where supply meets demand. By 2028, factors like lower interest rates, increased construction, downsizing by seniors, and policy reforms (such as zoning reforms) are expected to boost housing supply, aligning it more closely with demand.

Multifamily construction is projected to dip to a low of 327,000 units in 2026 and 2027, and then rebound between 2028 and 2029, with new supply rising to about 2.25% of total housing stock. So, expect a potentially less frantic market in 2028 and 2029.

The increased housing supply will have a moderating effect on price growth as appreciation rates will be slower in 2028 and 2029 compared to previous years. 

FAQs: Answering Key Investor Questions

Home prices are still expected to increase in 2025. The 2025 housing market predictions suggest a cooling market but no major correction. The NAR forecasts that the national average home price will grow by 2% in 2025. Similarly, Fannie Mae’s expert panel projects that home prices will drop to 3.8% in 2025, from 5.2% in 2024.

The general consensus is that the market is cooling, but not reversing. While we might see some declines (<5%) in some high supply metros, don’t expect a major price correction or a buyer’s market to suddenly emerge in the overall U.S. market. 

Mortgage rates are expected to reach 6.3% by the end of 2026, declining from 6.5% in Q4 2025. This is according to the latest housing market forecast from Fannie Mae’s Economic and Strategic Research (ESR) Group.

Yes. “Higher for longer” is the new reality, driven by factors like persistent inflation and bond market volatility. The extremely low rates of the past are unlikely to return. So as an investor or home buyer, you should adjust your expectations accordingly.

Even though the Fed might cut rates, other benchmarks (like the 10-year Treasury Yield) will keep borrowing costs relatively high. And while a gradual decline to the 5-6% range is possible, experts do not anticipate a return to sub-4% rates in their housing market forecast for next 5 years.

The key indicators of a housing market crash are:

• An up to 21% average decline in U.S. home prices (which happened from 2007-2011).
• Increased foreclosures and underwater mortgages (homeowners owing more than property value).

So will the housing market crash in 2025? Based on current trends and housing market predictions for next 5 years, the answer is no. As the two factors above aren’t expected to happen between 2025 and 2029, a housing market crash isn’t on the horizon.

This article has indepthly covered more than 25 housing market predictions for the next 5 years. We’ve touched on future home prices, mortgage rate trends, and the overall US housing market outlook for the next five years. 

While we recommend a long-term approach to investing in real estate as this will help you mitigate short-term market volatility, you should know that this is not a substitute for careful research and analysis. You need to stay abreast of local factors like the local climate, local market conditions, population growth, and job trends. 

We believe that regional variations will continue to play a significant role in investment outcomes over the next five years. This is why we’ve created a comprehensive list of the 25+ best markets for rental property investment in 2025.