August 31, 2025
As we look ahead to the next five years, it’s clear the real estate market is heading into a new phase. While the frenzy of price spikes might be behind us, the game is far from over. Buyers, sellers, and investors need to brace for a market that’s going to move differently—but not stand still.
One of the biggest shifts we’re expecting is in home sales activity. The so-called “lock-in effect”—where homeowners are hanging onto their low 3% or 4% mortgage rates—is starting to ease.
As more homeowners adjust to today’s 6-7% rates, we’ll see more listings hit the market. But affordability will remain tough, especially for first-time buyers, which means this will be a slower recovery, not a sudden surge.
Builders will keep filling in the gaps, but with more existing homes coming online, competition is going to get fierce. That’s great news for buyers who are hoping for builder incentives—things like mortgage rate buy-downs and upgrade packages. But as mortgage rates eventually drift lower in late 2025 or early 2026, those deals won’t last forever.
Another curveball? The way buyers find homes is changing. Comprehensive listings on big portals like Zillow and Realtor.com may become fragmented, pushing buyers to search across multiple platforms or, better yet, work directly with local real estate agents who have the inside scoop. Relationships will matter more than ever.
From a financing standpoint, mortgage rates will stay in the 6-7% range unless we see a recession, but short-term rates may start dropping by late 2025. However, high borrowing costs won’t just disappear overnight, and this will keep transaction volumes below the highs of the 2010s for the foreseeable future.
Total cost of ownership is another key factor. Rising utility bills, maintenance costs, insurance premiums, and property taxes mean buyers will be paying attention to more than just their monthly mortgage payment.
On average, homeowners are now shelling out over $1,700 per month on these “hidden” costs, making brand-new homes with energy-efficient tech more appealing in the long run.
Let’s not forget the impact of AI. While it won’t eliminate agents, it will change how we do business. Expect AI to handle more of the back-end tasks like compiling listings and processing paperwork, while agents focus on negotiations and client relationships—where that personal touch still matters.
Finally, the housing shortage isn’t going away anytime soon. With a supply deficit of up to 4.5 million homes, this imbalance will keep pressure on prices and rents, even if demand softens in certain regions. Builders are working to catch up, but with limited land and rising costs, this is a marathon, not a sprint.
Here’s what I tell my clients: if you’re planning to buy within the next five years, stay informed, stay patient, and stay ready. Timing the market perfectly is nearly impossible, but understanding the trends will help you make the smartest move when the opportunity presents itself.
Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
