If you’re in the market to buy or sell a home along the Front Range, you may have seen the news that conditions have improved slightly in recent months due to the Federal Reserve reducing the federal fund rate. And experts agree that incremental cuts are likely to continue in 2025.
Now, while mortgage rates don't directly follow the federal rate, they typically trend up or down based on moves the Fed makes. And that certainly occurred after the Fed’s first rate reduction in September. However, in the following weeks, mortgage rates began to climb again.
So, what can you expect in the coming year? Real estate market predictions for 2025 vary and nobody has a crystal ball, but the consensus is:
- Home sales will increase moderately year-over-year
- Home prices will also increase but not by much
- Mortgage rates will gradually and slightly decrease
Digging into the numbers, Lawrence Yun, chief economist of the National Association of Realtors® (NAR) predicts that, nationwide, the 2025 median home price will increase by just 2% over 2024. A more optimistic number came in from Fannie Mae, forecasting 3% in home price growth while The Mortgage Bankers Association landed just about in the middle, anticipating a 2.7% increase year-over-year.
However, analysts for Goldman Sachs increased their forecast for US home price appreciation to 4.4% in 2025, up from previous estimates of 4.2% and 3.2% respectively in April.
In addition, Yun speculates that existing home sales will rise by 9% to 4.5 million and new home sales by 11%, while Fannie Mae’s Housing Forecast for November 2024 predicts a 4.6% growth in total sales.
Chief economist for Realtor.com, Danielle Hale, sees just over 4 million home sales in 2025, a less optimistic increase of 1.5% compared to the current year, which has been one with fewer home sales than the market has seen in decades.
As for mortgage rates, the average 30-year fixed rate has ranged from 6.08% to 7.44% in 2024 according to Freddie Mac. Yun sees rates stabilizing at the low end of that range in 2025. Even if the Federal Reserve continues to cut rates, broader economic factors such as inflation (at risk with the incoming administration) could have more influence.
That prediction aligns with Vinay Viswanatha, research analyst for Goldman Sachs, who stated, “The peak in the cycle saw mortgage rates of about 7.8% in October 2023. Mortgage rates have since fallen all the way back down below 6.5%. We believe we’re well past the peak in mortgage rates, and we think it's going to be a slow but steady grind lower over the coming years.”
Despite mortgage rates remaining higher than in recent years, Chief economist at the Mortgage Bankers Association, Mike Fratantoni, sees mortgage origination volume increase by 20% in the coming year. While not huge, this would be an improvement over the current low levels.
A Look at Denver & Boulder Real Estate
While all of this 2025 speculation is about the U.S. housing market as a whole, the local real estate market may or may not trend the same.
The most recent data for the Denver Metro Area shows a median, year-to-date price of $650,000 for detached homes, an increase of just 1.73% over the previous year. Closed sales increased by 6.48% after a three-year decline, so the market is regaining positive momentum.
However, average days on market for 2024 (year-to-date through November) came in at 35, an increase of 12.90% compared to 2023 and a massive 191.67% higher than 2021 when rock-bottom mortgage rates supercharged the market. This slower, normalized pace is likely to continue.
November also closed with 6,261 active, detached listings on the market. That’s a huge increase of 32.01% over 2023. Add to that another 3,049 attached units (condos and townhomes), which is 57.08% more inventory year-over-year. That’s a lot of options for buyers to choose from!
So, if mortgage rates ease as predicted, it may take time for inventory to dwindle enough to drive home sales and prices up in 2025. In November, new listings were up 2.95% year-over-year but down 41.90% month-over-month, which is typical activity for the slow season.
If fewer homes continue entering the market now and into Q1 of the new year, inventory could be absorbed and even set the Denver and Boulder markets up for a brisk, competitive spring.
Will 2025 Be a Good Time to Buy or Sell a Home?
Perfection is a bit of a unicorn in real estate. When mortgage rates are low, buyer competition is high. Even a homeowner can get left in the lurch when they sell before securing their next home. When rates are high, buyer budgets are tight and selling requires patience, an expert strategy, and keen negotiation skills.
Ultimately, the best time to sell is when you need to sell. And the best time to purchase a home is when you can comfortably afford it. By working with an experienced real estate agent and lender, the rest is somewhat negotiable.
Other indicators that 2025 is a good time to buy a home:
- You find the right house and can afford it comfortably. Ask your agent and lender about loan and financing options—down payment programs, rate buydowns, an assumable mortgage, or a home renovation loan if you want to buy a fixer upper. Even an Adjustable Rate Mortgage (ARM) is a possibility—but tread carefully.
- You understand that rates change and you can potentially refinance to a lower mortgage rate down the road. If you wait for rates to decrease significantly before buying, 1) homes will likely have appreciated and cost more, and 2) you'll likely have more competition from other buyers with the same strategy.
- You plan on staying in the home for a long time. Historically, equity is gained slowly over the life of your loan—typically, a 30-year stretch. Big gains won’t be the case every year, but over time, you will gain equity which is what makes real estate a solid investment no matter what's happening in the market today.
Tips for successfully selling your home in the 2025 market:
- Get realistic, data-based pricing from a professional. After peaking back in 2021, the market has completely changed. Mortgage rates are up and buyer demand is down. A reputable agent can provide a deep-dive analysis of your micro-market and comparable properties to create a smart, competitive, and realistic pricing strategy.
- Enhance and highlight your home’s best features. With today's mortgage rates, more buyers are looking for move-in ready. That might require minor repairs, strategic updates, fresh paint, and sprucing up curb appeal. Before listing, it also means cleaning, staging, photography, and marketing. All worth it for a timely offer.
- Be willing to compromise. If the expert predictions come to fruition, 2025 will look somewhat similar to the current year. You may need to adjust your price along the way, offer a rate buydown, or provide buyer incentives and concessions. If you don’t want to negotiate, just prepare yourself for a long wait.
And again, working with an experienced and connected real estate agent can make all the difference. They can provide the insight, education, and professional services needed to achieve your goals in the new year.
