More Listings and Sales Expected in 2025

While interest rates have not been lowered as much as anticipated yet, they are widely predicted to continue falling in both the U.S. and Canada in 2025, resulting in lower borrowing costs for home buyers. The average rate of a 30-year fixed-rate mortgage in the U.S. is predicted to fall from 6.2% in the third quarter of 2024 to 5.9% in the fourth quarter of 2025, according to Fannie Mae’s September 2024 Housing Forecast, dropping an average of 0.1% per quarter this year.

Political stability and falling interest rates likely to boost sales, experts say

A HEALTHY MARKET

“I’m very excited about 2025. I think it’s going to be a healthy market,” says Mike Biryla, an agent at The Agency New York. After two years in which “we saw the fewest amount of transactions year over year that we had in decades, I think we’re going to start seeing buyers really start to come back,” he adds. “A lot of sellers have been reluctant to put their properties on the market and I think now that there’s going to be so much pent-up buyer demand, it’s kind of the perfect storm to see a lot of transactions happen.”

Sales of ultra-luxury properties have held steady over the past year, with ultra-high-net-worth buyers less affected by interest rates and more inclined to view property as a way to spread financial risk, says Steve Bailey, Managing Partner of The Agency in the Greater Toronto Area, but the increased cost of borrowing has slowed down sales of more affordable luxury homes. “I do firmly believe that with the continued drop in rates in both the U.S. and Canada, you’re going to see a very positive impact on housing, especially in the luxury space,” he says.

CONSUMER CONFIDENCE

Lower interest rates tend to lead to an overall boost in consumer confidence that affects sales even at the top end of the luxury market (more on that in the sidebar below). “I think people are going to feel a little less strapped in terms of borrowing or credit card usage, or they’ll be able to do a little bit more spending generally speaking, so I think it will kind of grease the market on an overall level,” says Billy Rose, Co-Founder and Vice Chairman of The Agency.

Even cash buyers tend to feel more confident spending when interest rates are low, says Eric Haskell, at The Agency based in Montecito. “There’s a lot of people that go into a contract saying they’re a cash buyer but they’re borrowing on margin or they’re borrowing using some sort of banking relationship to get an ultra-low interest-rate loan,” he says. “I have clients that have bought houses up to $50 million and they do it as a cash offer and then they’ll end up doing a loan during the term of the transaction, so I think it impacts everyone across the board. My more high-net-worth clients have told me how much it impacts them, almost as much psychologically as it does financially.”

SUPPLY AND DEMAND

Whether or not buyers or sellers come out on top in 2025 will depend on a delicate balancing act between supply and demand. Rose forecasts an increase in inventory “as a result of sellers who are going to be willing to trade up and not end up being a lateral move,” he says.

“Greater inventory will theoretically lead to more of a buyer’s market, but there’s also been a big pent-up demand from buyers who have been sitting waiting for rates to get better, so the big question is going to be which is going to offset the other or exceed the other?” The questions arising are whether there will be greater buyer demand that exceeds new inventory, or new inventory that exceeds demand. “In any respect, it should lead to more activity, more volume of transactions, more transactions on the absolute level and just free up the market quite a bit,” Rose says.

"In any respect, it should lead to more activity, more volume of transactions, more transactions on the absolute level and just free up the market quite a bit."

BILLY ROSE

PUSHING UP PRICES

High mortgage rates and elevated rental prices have left the market poised for a sudden flurry of action in 2025, says Tyler Whitman, Managing Partner for The Agency in the Hamptons. Many people, he says, “have been waiting for this moment, so if all of them enter the market at the same time when the mortgage rates go down, you are absolutely going to see an increase in prices.”

In particular, the $3 million-and-under market in both New York and the Hamptons is likely to see an uptick in transaction volumes as rates fall. “That’s a part of the market that’s been moving more slowly, so we’re excited to see transactions in that price range pick up a little bit more and hopefully have some more competition, which will lead to better prices for sellers,” Whitman says. “For buyers, though, mortgages becoming more affordable can actually make the homes less affordable. So there’s always two sides of the coin.”

AN END TO U.S. ELECTION ANXIETY

Another factor set to boost home sales in 2025 is the end of the election cycle, which tends to put a damper on the real estate market, leading people to halt their plans for making real estate moves. “Historically in New York the market from mid-September through the end of November freezes,” Biryla says of election years. “Regardless of who wins, 50% of the population is upset and people think that the world is going to end, and then come January or February things start to normalize and usually around March we’ll start seeing the market pick back up.”

Uncertainty is the greatest deterrent to those thinking of buying or selling a home, Haskell adds. “Being on the other side of the elections is going to feel good for everyone.”

The polarization made clear during an election cycle can be traumatizing, he says, “so the hope is that at least people can settle down for a second and know where the next four years are going and that’ll help in terms of confidence and business and homeownership.”

While it may take time for any housing or tax-related policies put in place by the new government to come into effect, knowing what those policies are is also likely to put homeowners’ and buyers’ minds at rest. “We should get clarity quickly after the election as to whether there are going to be major shake-ups or other impacts that affect property, and assuming we don’t see anything like that we should be moving into a new era with lower rates, more inventory and more sales,” Rose says.

CANADA SET FOR CHANGE

Canadians are set to head to the polls for a general election in October 2025, but the housing market is likely to perk up following the U.S. election, says Ontario-based Bailey. “The whole world is looking at this and it’s extremely important for stock markets, for bond markets, for potentially more interest-rate reductions and, more importantly for us, it’s very important for U.S.-Canada relations,” he says.

But the Canadian election could prove significant should a change in government lead to the lifting of an ongoing ban on home sales to international buyers, currently set to remain in place until January 2027. “If we do have a change in government that could be lifted. We’ve got people from Asia that want to buy, from the U.S., for sure, but you can’t do it unless you’re a permanent resident or unless you're a citizen,” Bailey says. The relative weakness of the Canadian dollar means that for international buyers in the U.S., Europe and Asia, Canadian property is a particularly attractive investment, he adds. “For them to buy in Canada right now would be fantastic for us. I think it would help the luxury market.”

A RETURN OF INTERNATIONAL BUYERS

The number of international buyers has fallen over the past few years in several key U.S. markets, but the combination of post-election political clarity and falling interest rates— predicted in many of the world’s major economies this year—may be enough to reverse that trend. “Our hope is that we do see more international money coming in,” Biryla says. “I don’t know if interest rates are going to be the trigger that brings them over.”

If falling interest rates alone aren’t enough to entice overseas buyers, an end to election uncertainty may draw some to the table. “As far as what I’ve seen, boots on the ground, they’re not really affected as much by the mortgage rates,” Whitman says, “but the political environment affects them and there’s going to be a change there, no matter what, so I am interested to see what kind of impact that has on the foreign buyer market.”

A RETURN TO NORMALITY

For both sellers and buyers, adjusting expectations after the pandemic years— when property prices reached record highs and interest rates reached record lows—is a continuing process. “What we hope to see is that we get into more of a balanced buyer and seller situation,” Bailey says. “A lot of sellers are still thinking based on what they saw during the pandemic, even though we’re so far from it at this point.”

Buyers, too, need to look at the bigger picture when it comes to interest rates. “What we have to really keep in mind, and which I think will become hopefully more evident, is that rates in the 5% to 7% range have been historic norms,” Rose says. Returning to a healthy market will take a combination of adjusting interest rates and adjusting expectations. “We’re getting back to the historical norms, which will be half of the battle, and the other half of the battle is the buyer and seller pool understanding that this is normal, and we shouldn’t be looking at it through skewed eyes of what was a recent occurrence.”

Overall, real estate agents expect to see a healthier and more active market this year. “I think 2025 is going to be a great year,” Biryla says. “I think 2026 is going to stay strong and roll into 2027.”

For insight into the mindset of buyers shopping for a home in 2025, consumer spending predictions may indicate how wealthy or even cash-strapped people are likely to be feeling.

Predicted growth in consumer spending can be a sign that people may feel confident paying slightly more for a home. “When you’re feeling better about your affordability and borrowing and cash position and all that, you’re going to feel better generally speaking spending more as well,” Rose says.

Economists predict a modest increase in overall consumer spending across durables, nondurables and services this year. As of September 2024, total consumer spending is projected to rise from $19.5 trillion in 2024 to $20.2 trillion in 2025, a 2.5% rise after adjusting for inflation, says Stephen Brown, Deputy Chief North America Economist at Capital Economics. For Canada, total consumer spending is projected to rise from $1.61 trillion in 2024 to $1.68 trillion in 2025, an increase of 2% in real terms.

The reason? Canadian households “have been a lot more exposed to higher interest rates, so there’s a greater share of variable rate debt, particularly for mortgages, in Canada,” he says. “That’s been weighing on spending and even though interest rates are now coming down, immigration in Canada is also likely to fall next year, so that’s adding to a bit of the weakness. By contrast, in the U.S. households aren’t quite as exposed to higher interest rates, but they’re also benefiting a lot more from the rise in equity markets at the moment. In particular U.S. equities, because they’re so tech-dominated, are doing very well, so that’s boosting households’ asset holdings, making them feel a bit wealthier, so they’re more likely to spend as well.”

Deloitte’s third-quarter report outlining a U.S. economic forecast, the United States Economic Forecast, noted that consumer spending “continues to exceed expectations,” with a recent increase in spending on durables, which is “often seen as a signal of rising consumer confidence.” Plus, according to the forecast, “interest-rate cuts should drive stronger demand for durable goods next year,” the company predicted. “Spending on services is predicted to increase more rapidly than spending on goods, rising 2% in 2025.” Spending on durable goods was predicted to rise by 1.7% in real terms and spending on nondurable goods by 1.4%.