5 Ways Inflation Could Affect the 2025 Housing Market
Inflation is disrupting the housing market. See how inflation influences real estate and what it means for home buyers and sellers.
Homeowners across the nation have felt the financial pressure of inflation, and 2025 is not expected to be any different from the past few years. Rising mortgage rates have caused a slowdown in U.S. housing market activity, leading numerous buyers to postpone purchases; nevertheless, home values persist, showing resilience amid this trend.
Goldman Sachs has projected that home prices will increase by 4.4% in 2025—a slight uptick from its previous projections of 4.2% but a slight decline from the 4.5% increase that occurred in 2024.
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Before you make any move, it’s important to examine the current housing market and listen to what the experts say about inflation’s impact on homes. This article will serve as a guide to how inflation affects the housing market and what it means for you.
Anticipated decline in 2025 inflation: What to expect
Similar to its prediction in 2024, Goldman Sachs anticipates that 2025 will be a year of growth, surpassing expectations. Also similar to its 2024 forecast, the company expects a rebalanced labor market, combined with dips to inflation and dwindling recession fears, to lead to an overall stronger economic output.
“The US economy is in a good place,” according to David Mericle, chief US economist at Goldman Sachs Research, in the company’s 2025 outlook predictions.
“Recession fears have diminished, inflation is trending back toward 2%, and the labor market has rebalanced but remains strong,” he adds.
The investment bank projects the worldwide GDP to expand by 2.8% next year on an average annual basis.
A survey of over 200 senior investment professionals from Franklin Templeton Institute’s Global Investment Management expects an overall robust economy, with inflation, as measured by U.S. Core Personal Consumption Expenditures, to round out the year at 2.75%.
This is higher than estimates from both The Fed and Bloomberg, which expect inflation to finish out the year at 2.2% and 2.3%, respectively.
Data from the Consumer Price Index, published at the end of December, had inflation hitting 2.9% at the end of 2024. This was a dip from 2023, where it ended at 3.9%, according to Coin News’ U.S. Inflation Calculator.
