5 Year Real Estate Forecast

Are you wondering what the future holds for the housing market? Whether you’re planning to buy your dream home, sell your property, or just keep tabs on market trends, the next five years will be a crucial period of change in real estate. From home prices and mortgage rates to the much-debated possibility of a market crash, the landscape is evolving — and staying informed is key.

In this post, we’ll explore five real estate predictions to help you navigate the market with confidence.

1. Home Prices: Slower, But Still Growing

The days of double-digit home price growth are behind us, but that doesn’t mean prices are dropping anytime soon. After a red-hot few years, home price increases are expected to moderate over the next five years.

• 2024 Snapshot: As of mid-2024, the median price for existing homes hovers around $416,700, while new construction is a bit higher at $429,800. While these prices are near record highs, experts forecast a slower appreciation rate moving forward.

• The Next 5 Years: Analysts expect home prices to rise by a modest 2.2% year-over-year by mid-2025, with a similar trajectory through 2028. While that’s a far cry from the surging prices of recent years, it signals a shift toward a more sustainable market. However, not all markets will behave the same.

• Regional Variations: In trendy, high-demand areas like Austin, Texas or Malibu, California, expect price growth to outpace national trends. Meanwhile, cities with economic challenges or excess inventory, such as Detroit, may see price stagnation.

2. Mortgage Rates: Climbing, But Not Soaring

Remember the ultra-low mortgage rates that fueled a housing frenzy? Well, those days are gone, and mortgage rates have made their way back up into the mid-to-high single digits.

• What to Expect: While rates are higher than recent lows, don’t expect a drastic increase in the next five years. Forecasts suggest rates will hover around the same levels through 2026 before possibly stabilizing or even dipping slightly by 2028, depending on inflation and broader economic conditions.

• Impact on Buyers: Higher mortgage rates mean lower affordability for homebuyers. If you’re planning to purchase, consider locking in rates now or budgeting for slightly higher borrowing costs in the years ahead.

3. Housing Crash: Unlikely, But Be Prepared

Ever since the 2008 financial crisis, there’s been a lingering question: will the housing market crash again? While nothing is ever guaranteed, the consensus among experts is that a full-blown crash is unlikely.

• Why? Several key factors are working to keep the market stable:

  • Strong Demand: Millennials are entering their peak homebuying years, and with a limited supply of homes available, demand remains strong.

  • Stricter Lending Standards: Unlike in 2008, today's borrowers are better qualified, thanks to tighter lending standards, reducing the likelihood of widespread defaults.

  • Low Inventory: Housing supply is historically low, which helps keep prices from plummeting even as demand cools slightly.

• What Could Change? Of course, unexpected economic shifts or policy changes could create new pressures, but based on current trends, a crash on the scale of 2008 seems off the table.

4. Housing Supply: Still Playing Catch-Up

The US housing market continues to face a supply shortage. While there’s hope that new construction will increase, builders are facing rising costs, labor shortages, and regulatory delays.

• Supply Issues: The cost of materials and labor could limit the pace of new housing development, and local zoning laws in some areas may further constrain supply.

• Future Outlook: As demand persists and inventory remains tight, this shortage could keep prices stable or even rising in high-demand areas. For buyers, this means competition may remain stiff in some regions. If you’re a seller, the scarcity of homes could work in your favor for years to come.

5. Market Outlook: A Balancing Act

So, where is the housing market headed over the next five years? While we’re unlikely to see the frenzy of the past, don’t expect a dramatic slowdown either. The market will likely balance out, with neither buyers nor sellers having a clear upper hand.

• For Buyers: Mortgage rates and home prices will likely rise slowly, so if you’re planning to buy, stay informed and be ready to act when the right opportunity comes along.

• For Sellers: If you’ve been sitting on your property, now might still be a good time to list — especially if you’re in a high-demand area. Just be prepared for a less aggressive market than in years past.

Conclusion: Navigating the Market With Confidence

The next five years in real estate will be marked by moderation. Home prices will continue to rise, albeit at a slower pace, and mortgage rates will likely stabilize. Supply shortages may persist, but don’t expect a 2008-style crash. Whether you're buying or selling, staying informed about local market conditions, mortgage trends, and housing supply will help you make confident decisions.

Are you ready to navigate this shifting market? Keep these predictions in mind as you plan your next move in real estate — and stay flexible. Balancing opportunity with caution will be the key to success in the years ahead.