Real Estate Market Forecast: High Rates and Limited Inventory Likely to Persist

New year, same old real estate market: The high mortgage rates, scarce inventory and dismal affordability that have plagued housing look set to linger into 2025. There were some signs of improvement late last year. Pending home sales rose for four months in a row through November, boosting hopes that the two-year deep freeze in residential real estate was starting to thaw.

Industry experts have said buyers are increasingly adjusting their expectations, deciding they can’t wait for lower mortgage rates to spring for a home. In some markets, consumers “are taking advantage of more available inventory,” National Association of Realtors Chief Economist Lawrence Yun said in a statement. “Mortgage rates have averaged above 6% for the past 24 months. Buyers are no longer waiting for or expecting mortgage rates to fall substantially.” Particularly in the South, where relatively more homes are available and jobs are plentiful, pending home sales jumped 5.2% in November. Mortgage rates dipped late last summer ahead of the Federal Reserve’s September interest rate cut, its first in four years. But they’ve remained at decadeslong highs and began marching toward the 7% mark around the end of the year. So it was hardly a surprise that mortgage applications plunged nearly 22% at the end of December. Granted, that’s typically the slowest month for homebuying activity, but with the central bank now signaling caution around the pace of further rate cuts this year, hopes have been shelved that mortgage rates will fall sharply anytime soon. “We are no longer having a view that mortgage rates are going to go to the fives next year or even the following,” Robert Reffkin, the CEO of real estate company Compass, told CNBC last month. “We believe they will stay around the 6% range for the next two years.” Broader economic uncertainties are also weighing on the housing market, particularly the inflationary risks of President-elect Donald Trump’s economic agend

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