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Don’t expect any massive mortgage rate drops or the housing market to be flooded with an excessive amount of inventory any time soon. And inflation? It’s too early to tell whether it will make a comeback under the incoming presidential administration, according to economists who recently weighed-in on what to expect in the 2025 housing market.
While their forecasts initially appear to paint a dim picture, they all say that the upcoming year will be a better one for homebuyers and homesellers across the nation, especially those in Silicon Valley.
Lawrence Yun, chief economist of the National Association of Realtors, says “The worst may be over. We will see continual job gains. (Silicon Valley) is at the center, expect inventory to increase.”
Dave Walsh, former president and state treasurer for the California Association of Realtors and broker manager at the Compass Los Altos and San Jose offices, said he believes that the stock market will continue to drive the local housing market.
Elliott Eisenberg, an internationally acclaimed economist and public speaker who is known as the “Bowtie Economist,” predicts that Silicon Valley will outperform the nation in 2025.
The three have publicly shared their thoughts about interest rates, home prices, inventory and what Trump’s presidency could mean for real estate in 2025 during separate events in recent weeks. We’ve compiled their forecasts.
Here’s their take on what may happen in the upcoming year:
Home prices & sales
Eisenberg
Eisenberg predicts home prices nationwide to continue to rise in 2025. “This year has been better for real estate with more home sales and higher inventory than compared to 2023. There’s still not enough houses on the market, however, so with inventory as low as it is, expect prices to continue to rise,” he said during a “Statistically Speaking” videocast with MLSlistings.com in November.
He said 2025 will be a particularly good year for the San Francisco Bay Area.
“You’ll be outperforming the nation as a whole,” he said. “Incomes in the area (San Mateo, Santa Clara, San Benito, Santa Cruz and Monterey counties) and north … are good. AI is becoming a huge monster.
“There’s no question the amount of spending and effort being put on office space being rented is intense and (Silicon Valley) is at the epicenter of it,” he said.
“The stock market is doing well. IP mergers and acquisitions are going to improve now because the new administration is going to be more favorable and predisposed to it compared to the outgoing administration. That pushes up stock prices.”
Walsh
Walsh also projects Silicon Valley to outperform the rest of the nation in 2025.
“The National Association of Realtors predicts home sales nationwide will increase 9% in 2025. The California Association of Realtors projects sales in the state will increase 10.5%. Silicon Valley will outperform the nation as a whole with 15% growth in closed sales,” Walsh said during a presentation to members of the Silicon Valley Association of Realtors in early December.
“There is not a marketplace in our valley that has not done really well this year compared to last year. Silicon Valley is a stock market driven marketplace, so the market is very different from the rest of the nation.”
Yun
“All data is saying that we will have more sales,” Yun said during an economic forecast at the Silicon Valley Association of Realtors general membership meeting on Dec. 9.
Yun projects existing home sales nationwide to rise 9% in 2025 and 13% in 2026. He predicts that more new homes will come to the market with new construction sales rising 11% in 2025 and another 8% in 2026.
He forecasts the median home price to be 2% higher in both 2025 and 2026.
He said the “lock-in effect” – a term that refers to a situation where homeowners are reluctant or unwilling to sell their homes because they are unlikely to match their current interest rate – is slowly changing due to a “natural inertia.”
“Pent-up sellers cannot wait any longer to sell their homes because of life circumstances,” he said.
Inflation & interest rates
Eisenberg
Eisenberg said one caveat of the new year is the uncertainty over President-elect Donald Trump’s policies on immigration, tariffs, tax cuts and deregulation. “Back three or four months ago, there was a noticeable decline in rates. Pending sales went up, refi activity went way up. Well now, all of a sudden what we thought would happen may well not happen. … The victory by Trump has given us all reasons to reassess.”
According to Eisenberg, Trump’s policies offer an opportunity for inflation to return. It’s a bad direction for interest rates. Eisenberg said he is not sure where rate cuts are headed. “I’d be hard-pressed for long-term, 30-year fixed rate mortgage rates to decline much lower. If they fall to 6%, I’d be a pretty happy camper.”
There’s fear that big tax cuts will increase the deficit and increase inflation, he added.
Walsh
Walsh said there’s still a question of future policies under Trump’s incoming administration. Will it be Trump growth or Trump recession?
He expects certain provisions in the Tax Cuts and Jobs Act (TCJA) of 2017 that are set to expire after 2025 will be extended since the tax cuts benefited the majority of people.
Trump is on the side of the stock market, so it is likely assets will grow, he said.
On the topic of interest rates, Walsh said, with the exception of downturns like the dot.com bust, the recession and the pandemic years, a 6.7% interest rate has been the 40-year norm.
Yun
With Trump as president, Yun expects the stock market will see growth for at least the next year. National job gains since the pre-pandemic era have led to record-high payroll employment, he said. Yun is confident there will be job gains and increased home sales across the country, particularly in the Silicon Valley region.
Yun said home sales depend mainly on mortgage interest rates and jobs. He expects six to eight more rounds of rate cuts, but does not expect all-time low interest rates of 3-4% to return anytime soon. He said 6% will likely be the “new normal,” with the rate bouncing between 5.5% to 6.5%.
Yun said one thing that could benefit homeowners is raising the capital gains tax exclusion of $250,000 for singles and $500,000 for married couples. These amounts have stayed the same for years. The National Association of Realtors is actively working on a proposal to have the exclusion indexed to inflation (which means the exclusion would be automatically adjusted upward based on the rate of inflation), he said.
Immigration
Eisenberg
Trump’s immigration policy is Eisenberg’s biggest economic worry. If a million or more undocumented immigrants are deported, there’ll be a lot of empty houses everywhere. This could change the profile of communities, he said.
“We are attached to these workers,” Eisenberg said. “Our economy is living with them. We’ll lose workers, wages will start to rocket,.”
In addition, the Gross Domestic Product (GDP) – which is a measure of the value of all goods and services produced in the county during a specific period of time – will go down, he added.
“Over time, it would have extreme effects on the economy, and I’d be very, very nervous. We won’t know the entire effects,” he said.
Walsh
Walsh said Trump’s policies on tariffs and immigration could cause the cost of housing to rise, as one-third of construction workers are reportedly illegal immigrants.
Tariffs
Eisenberg
Eisenberg said he believes Trump’s plan to raise tariffs will no doubt raise the cost of housing. A lot of components used to build homes are imported. “It is no longer possible to physically build an entire 100%-manufactured-component-part-U.S.-house,” he said.
Yun
Yun said tariffs would be “very bad news for the global economy,” unless they boost American production over time. The nation already has a labor shortage, so Trump’s proposal to deport illegal immigrants could be a problem, unless it leads to a more orderly process, like granting temporary work visas for foreign construction and field workers and other jobs that don’t attract American workers.
“We’ll have to wait and see if Trump will address the budget deficit,” he said.
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
