Real Estate

Bank of America Releases 2025 Housing Forecast

Ken Metral

16 Dec 2024 — 2 min read

U.S. home prices are expected to continue rising in 2025, albeit at a slower rate than this year, according to a recent forecast from Bank of America. The investment bank’s mortgage-backed securities (MBS) research team predicts a 2% increase in national home prices next year. This projection marks a downward revision from its earlier 4.7% growth estimate issued in June.

Limited Inventory Keeps Prices Elevated

Jeana Curro, head of MBS research at Bank of America, attributes the positive price growth to a tight supply of homes for sale, which continues to keep prices elevated. “Although inventories are gradually building, this is contributing to the slower pace of appreciation,” Curro told ResiClub.

The constrained inventory situation stems primarily from high mortgage rates. Many existing homeowners with mortgages below 3% are reluctant to sell, leaving limited housing supply on the market. As a result, inventory levels remain tight, driving upward pressure on prices. Bank of America forecasts an average mortgage rate of 6.5% for 2025, slightly below the expected 6.8% average for 2024.

Uneven Growth Across Markets

While the national outlook predicts modest price appreciation, Bank of America expects price declines in certain markets where inventory is increasing. Factors like rising new construction, affordable rental availability, and homeowners motivated to sell due to escalating taxes and insurance costs are contributing to these local trends.

Curro highlighted Austin, Texas, and Tampa, Florida as examples of markets where inventory has expanded. These cities, which were notable pandemic boomtowns, are now seeing price corrections:

Austin: Home prices are down 3.5% year-over-year and have declined 21% from their peak.
Tampa: Prices fell 1.2% year-over-year, signaling a similar cooling trend.

Outlook for 2025

Overall, the U.S. housing market will see a mix of modest growth and localized declines in 2025. Bank of America’s forecast reflects the balancing act between ongoing inventory challenges and shifting regional market dynamics. While national price appreciation slows, markets like Austin and Tampa suggest that regional factors—such as taxes, insurance, and new housing supply—will play a key role in shaping local outcomes.

For prospective buyers and sellers, this forecast underscores the importance of watching mortgage rates, inventory trends, and specific market conditions heading into 2025.

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