The real estate market has been a whirlwind over the past few years, and as we head into 2025, there are big trends and shifts on the horizon. From interest rate changes to evolving homebuyer preferences, here’s a look at what to expect in the coming year.

1. Interest Rates: A Likely Return to Stability

Over the past few years, interest rates have experienced major fluctuations. In 2025, experts anticipate a gradual stabilization, though rates may stay above the historic lows we saw in the early 2020s. This shift may create a more balanced market and give buyers and sellers a clearer picture of what to expect. For buyers, this means affordability could be steadier, which may encourage those who held off in prior years to re-enter the market. Sellers, on the other hand, might see a more predictable pace of offers as rates stabilize.

2. Inventory Levels: An Increase on the Horizon

Inventory shortages have been a challenge, but 2025 could bring a change. With new construction projects expected to finish, the supply of homes may increase, giving buyers more options and reducing some of the fierce competition seen in recent years. Homeowners who bought during the pandemic boom may also start listing their properties, adding to available inventory. For buyers, this could translate to more negotiation power and fewer bidding wars.

3. Smaller, Smarter, and Sustainable Spaces Are In Demand

Homeowners and buyers are becoming more intentional about their space, with a noticeable trend towards compact, efficient, and smart homes. The focus is shifting from sheer square footage to homes that are well-designed, energy-efficient, and tech-enabled. Features like smart lighting, home automation systems, and energy-efficient appliances will be increasingly popular. Sustainability is taking center stage, with buyers looking for homes that minimize their carbon footprint. Expect to see an increase in demand for solar panels, green roofs, and sustainable building materials. Buyers may even prioritize homes with EV charging stations, a must-have feature for the growing number of electric vehicle owners. For sellers, this trend means that adding smart home features or energy-saving upgrades could increase the attractiveness of their homes. Installing sustainable features or investing in eco-friendly landscaping could make a property stand out and attract environmentally-conscious buyers. Buyers, especially Millennials and Gen Z, will likely prioritize homes that cater to these preferences.

The work-from-home trend is here to stay, but it’s evolving. In 2025, homeowners will be looking for flexible spaces that can easily transform to meet multiple needs. Buyers want homes with rooms that can double as an office, guest room, or gym, depending on their lifestyle. If you’re selling in 2025, consider staging spare rooms with versatile setups that hint at multiple uses. For buyers, homes that allow them to adapt spaces to their unique needs will be a priority, especially if they work remotely or enjoy hybrid work options.

4. Suburban and “Second City” Popularity Continues

In 2025, suburban areas and so-called “second cities” (smaller, up-and-coming urban areas) will remain popular as people seek a better balance between affordability and quality of life. Many remote and hybrid workers are choosing locations with lower costs of living and less congestion while still being accessible to big cities.

For sellers in these areas, 2025 could bring sustained demand, especially if the area offers amenities like parks, good schools, and reliable internet. For buyers, this trend means more opportunities to find affordable homes outside major metro areas without sacrificing access to city amenities.