Where Freddie Mac predicts the housing market and home prices will go in 2025

Want more housing market stories from Lance Lambert’s ResiClub in your inbox? Subscribe to the ResiClub newsletter. This month, ResiClub rounded up U.S. home price forecasts for 2025 from 16 different firms, with the average tracked forecast predicting national home prices to rise 3.5% in 2025.  Notably, government-sponsored mortgage lender Freddie Mac stands out with one of the most conservative predictions, anticipating a modest 0.6% growth—the second-lowest estimate among the forecasts reviewed. In a national housing market with just 0.6% annual appreciation, some regional housing markets would end up down year over year in 2025. “In general, we’re in an economy that’s doing well but slowing down a bit, and we expect that to continue into next year. We’re not expecting a recession—that’s not our baseline view—but lower growth,” Leonard Kiefer, Freddie Mac’s deputy chief economist, told ResiClub.  “Interest rates have moved higher relative to where they were a couple of years ago, creating affordability challenges,” Kiefer explained. “That, combined with a weaker economy, might result in a slight slowdown in housing demand—not a recession or declining prices, but a moderation.” U.S. housing affordability deteriorated rapidly following the pandemic housing boom, leaving many prospective buyers priced out as home prices soared and mortgage rates more than doubled. Moreover, national home prices continued to rise in 2023 and 2024.  According to the Freddie Mac House Price Index, U.S. home values increased 53% from October 2019 to October 2024. Meanwhile, the median household income remained relatively flat from 2019 to 2023, according to ResiClub’s analysis of U.S. Census Bureau data.  “Our view is based on affordability measures, higher rates, and long-term fundamentals like income growth,” Kiefer said. “Housing prices have outpaced these fundamentals, and we expect that to balance out with moderation in prices over time—that’s what we see in our forecasts.” What Freddie Mac is watching beyond 2025 In addition to evaluating the factors affecting the coming year, Kiefer says Freddie Mac is also keeping a few bigger-picture shifts in mind as we approach the new year.  Freddie Mac recently reported that a housing shortage of 3.7 million units is also contributing to strained affordability in the long term. “Inadequate housing supply leads homeowners and renters to bid up the sale price and rent of available housing, which puts a squeeze on affordability,” Freddie Mac economists wrote in their report. Additionally, Freddie Mac published a report this year noting that the “Silver Tsunami” of freed-up housing supply coming from baby boomers will be more like a trickle. “While there’s concern about baby boomers releasing their homes and increasing inventory, our analysis shows that this will happen gradually, not all at once,” Kiefer told ResiClub. “Even with a pessimistic view of health outcomes, aging out won’t occur significantly until the 2030s.” Lastly, researchers at the enterprise are watching how regional migration shifts continue to play out following the pandemic—particularly focusing on the continued flow of people moving to Southern markets and the rebound of some Midwestern markets.  “You have the business cycle that generally tends to follow everywhere,” Kiefer said, “but there are more regional dynamics that are really interesting and important to watch to know how some of those local markets are evolving.”