U.S. home prices will rise about 2.4% over the next 12 months, according to the Q1 2025 VeroFORECAST report recently released by Veros Real Estate Solutions.
That’s a modest decline from the previous quarter’s forecast of 2.7%.
The fundamental conditions shaping the housing market largely mirror those of the prior quarter, the firm says in the report. Mortgage rates, a dominant force in the market for the past few years, are projected to remain high, with limited prospects for near-term reduction. Inflation continues to be a significant concern, as evidenced by the recent increase in the core personal consumption price index for February 2025 – and this is before the full impact of tariffs is felt.
This stickiness in core inflation will likely prompt the Federal Reserve to keep interest rates at their present levels for the foreseeable future, Veros says. While the labor market is currently stable, the consequences of layoffs could emerge in the coming months.
The spring selling season is now underway, and inventory levels are higher than last year. Given the widespread expectation of minimal relief on mortgage rates, both buyers and sellers appear to have adjusted their expectations. The increase in available homes provides buyers with more negotiating leverage, suggesting that average home prices across the U.S. will increase only modestly.
However, this nationwide outlook masks significant regional differences. The Northeast and Midwest continue to be the strongest markets, driven by low inventory and relatively more affordable housing compared to the sunbelt.
Furthermore, the slowdown in remote work and the return to office mandates have largely stemmed the outflow of people from these regions.
Further, retirees seeking to relocate from colder climates are facing affordability challenges. Rising insurance and HOA fees are also dampening housing demand in Florida. Significant new construction in the sunbelt states has created ample supply, keeping prices in check and even leading to depreciation in some markets.
Photo: Phil Hearing