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📈 US Home Prices to Rise 3.5% in 2025 — Despite Uncertainty over the Impact of Tariffs

A new Reuters poll of top housing experts has revealed a cautiously optimistic outlook for the U.S. housing market.

Despite rising mortgage rates and growing concerns over tariffs, home prices are projected to rise by 3.5% in 2025, according to a survey conducted between May 19 and June 3.

The poll, which included 27 real estate analysts, suggests that while demand remains resilient, external pressures could weigh heavily on new home construction — especially in the affordable housing segment.

📌 Key Takeaways

• 🏡 Home prices to rise 3.5% in 2025 and each year through 2027.
• 💸 Mortgage rates to remain elevated, with only moderate relief expected.
• 🚧 Tariffs and rising debt seen as major hurdles to new home construction.
• 🔨 Affordable housing supply likely to be hit hardest by inflationary policies.
• 📉 Home sales to remain weak, well below 2021’s peak.

📊 Home Price Outlook: Growth Slows but Persists

Analysts predict U.S. home prices will rise 3.5% annually through 2027 — the slowest rate since 2011. While far from the breakneck increases of the pandemic boom, this modest appreciation reflects ongoing pressure from low inventory and buyer demand.

The Case-Shiller index, which tracks price movements in 20 major metropolitan areas, is already showing signs of this deceleration. Compared to pre-COVID levels, home prices are still 50% higher, but the days of double-digit yearly gains appear to be over.

“The housing market remains in a cooler phase as sellers continue to adjust to looser conditions after the red-hot pandemic years.” – Thomas Ryan, Capital Economics

💰 Mortgage Rates: Little Relief in Sight

The outlook for mortgage rates remains restrained. Although some rate cuts are expected later in 2025, the average 30-year fixed mortgage rate is forecast to dip only slightly to 6.73%, down from today’s 6.98%.

• 2025 Forecast: 6.73%
• 2026 Forecast: 6.33%
• 2027 Forecast: 6.29%

These rates remain more than double the record lows near 3% seen during the pandemic, which many existing homeowners are reluctant to give up — contributing to tight resale inventory.

“If mortgage rates were to drop meaningfully — say by 50 to 100 basis points — we could see a surge in buying activity. But rates really need to come down first.” – Lawrence Yun, NAR

🚧 Tariffs Threaten New Construction, Especially for Starter Homes

One of the most pressing concerns cited by analysts is the impact of President Trump’s proposed tariffs on key trading partners. These could significantly drive up the cost of building materials and labor, potentially derailing plans for affordable housing development.

• 90% of experts surveyed believe tariffs will lead to fewer new homes being built.
• Many expect a shift toward smaller homes or reduced construction activity overall.

“They’re going to make it more expensive to build. You’ll see either fewer homes built, smaller homes built, or a combination of both.” – James Egan, Morgan Stanley

This comes at a time when construction spending fell unexpectedly in April, particularly for single-family homes. The mismatch between demand and new supply could keep home prices elevated despite higher mortgage costs.

🏠 Affordability Still Out of Reach for Many

Only 50% of analysts believe first-time homebuyer affordability will improve over the next year, down from 62% in February. While more homes are expected to hit the market, especially resale properties, affordability remains a challenge due to both high interest rates and lingering price inflation.

Meanwhile, existing home sales are projected to remain flat, holding near 4 million annualized units before rising slightly to 4.1 million by year-end — still far below the 2021 high of 6.6 million.

All that said, the affordability issue is regional. While some markets such as Texas, Florida and California have seen rising prices push homeownership out of reach for many, other major metros – specifically in the Midwest and northeast – remain much more affordable and will likely prove to be much more price-resilient through 2025.

📦 Final Thoughts: What This Means for Buyers and Builders

The U.S. housing market is entering a delicate phase of slower price appreciation, persistent affordability challenges, and potential supply disruptions.

While home values are expected to keep rising, the pace will be more manageable. However, without meaningful relief on mortgage rates and clearer direction on trade policy, many potential buyers — especially those seeking affordable housing — may remain sidelined.

For builders, higher input costs tied to tariffs could constrain new development. Unless policy shifts or subsidies emerge to support low-cost housing, inventory pressures may persist.

In short: the market is stabilizing, not crashing. But for buyers, investors, and developers alike, 2025 will be a year that demands strategic decision-making.