Following a year with elevated interest rates, both homeowners and prospective buyers are curious about the real estate landscape in 2025.

Realtor.com, a leading real estate platform in the U.S., has shared its projections for the housing market in 2025.

It appears that mortgage rates are unlikely to revert to the pre-pandemic average of 4% anytime soon. Therefore, trends similar to those of 2024 may persist, including a shortage of available homes and potential buyers. However, the outlook for Tennessee and much of the South could differ from these trends.

Here’s a glimpse of what residents of Tennessee can anticipate in 2025 in the real estate scene.

Will housing prices rise or fall in 2025?

The forecast suggests a 3.7% increase in home prices for 2025, attributed to slightly lower mortgage rates compared to 2024, with an expected average monthly rate of 6.3%.

According to their analysis, “Mortgage rates are expected to keep mortgage payments relatively stable in 2025, despite ongoing increases in home prices.”

Home sellers will likely continue holding the upper hand in 2025 due to limited home inventory and strong demand in popular areas. Nevertheless, high interest rates may restrict the number of buyers able to afford homes.

While buyers can anticipate a less frantic market than previous years, the reality of high mortgage rates and home prices will keep costs elevated.
 

Will more homes be sold in 2025 compared to 2024?

The rate of homeownership is projected to decline by 0.3% from 2024 to 2025, dropping from 65.6% to 65.3%. Still, existing home sales are forecasted to rise by 1.5%, reaching approximately 4.07 million. The inventory of homes on the market is also expected to increase by 11.7% in 2025 compared to 2024.

The dynamics of buying and selling homes are closely linked to mortgage rates, as illustrated by the drop in rates to 6.08% in September 2024. This decline coincided with a surge in active homes for sale, marking the highest number available since December 2019, as noted by Realtor.com.

What will the housing market in Tennessee look like in 2025?

Realtor.com has specified its predictions by metropolitan areas within Tennessee. Analyzing last year’s performance revealed a decline in sales growth from 2023 to 2024; however, projections for 2025 show only price increases year-over-year. Price growth is anticipated in all major urban regions across the state, with a minimum forecast increase of 6.3%.

What are the expectations for the rental market in 2025?

The rate of new multifamily unit construction has risen, resulting in a rental vacancy rate of 6.9% in 2024. However, this increase in availability does not suggest a decrease in rental prices. The median asking rent is expected to be marginally lower in 2025, by 0.1% compared to 2024, indicating ongoing affordability challenges for many renters.

Realtor.com predicts that the South’s relatively affordable housing will continue to draw interest in 2025 despite stable rental prices. The South is expected to experience a 1.5% growth in rental inventory, the most significant among all regional markets.
 

What does the future hold for first-time homebuyers in 2025?

It appears that 2025 may not be favorable for first-time homebuyers, as mortgage rates are projected to remain relatively unchanged. The average mortgage rate in 2024 was 6.7%, with a forecast of 6.3% for 2025.

The share of first-time homebuyers was at a historic low in 2024, primarily due to high costs associated with purchasing versus renting, significant home equity for existing homeowners, and an increase in the share of investors in the market.

As the homeownership rate is anticipated to decline, many may find that 2025 is not the best year to purchase their first home.