Forecasts in 4 top markets a reminder that real estate is local 

As real estate agents and brokers prepare for 2025, they will need to consider how national forecasts — including predictions of more transactions in 2025 — apply to their local markets.

While the mantra "all real estate is local" remains in play, some trends proved fairly consistent between 2020 and 2024: Most of the country saw a huge spike in sales when mortgage rates were at record lows, and then a general slowdown starting in 2022 when 30-year rates began climbing, surpassing 7% for the first time in more than two decades. 

But the coming year will likely be one of transition. While rates are expected to remain elevated, economists believe demand will pick up. That's because buyers have adjusted to higher rates and now have more homes to choose from as inventory improves — in some regions. Other markets will continue to wrestle with supply constraints, however, putting a cap on sales while prices rise.

During NAR's annual forecast summit last week, experts took a closer look at four markets that exemplify regional differences: Austin, Texas; and the states of California, Florida and Virginia. 

Here's what they're expecting to see in 2025.

Austin: Stability returning after a wild ride

Austin was one of several pandemic boom towns to experience massive price growth starting in 2020, followed by a significant slowdown in sales and declining prices over the past two years. That downward trend is expected to continue in 2025, but the market is stabilizing, Clare Knapp, housing economist for the Austin Board of Realtors, said during the summit, noting that the slowdown is far from a crash.

"Overall our home prices are still very much elevated relative to where they were prior to the beginning of the pandemic," Knapp said. 

More rebalancing is expected as the Austin market works through high levels of inventory — because the region isn't dealing with as much pent-up demand as other areas, home sales could move either up or down around 5%, Knapp predicted.

"Our sellers are still adjusting to that higher supply environment and need to probably be willing to come down [in price]," she added.

California: Many are leaving, but demand is still high

If you look at migration trends, the Golden State has topped the list of areas people are leaving — but there's still considerable competition for homes, said Jordan Levine, chief economist at the California Association of Realtors.

That's because the state has around 40 million people in a market where underbuilding has been a trend for years, Levine said. "We still have more buyers than we have homes to put them in."

With California's median home prices expected to keep rising and top $900,000 in 2025, Levine noted that sellers are feeling locked in not only by their low mortgage rates, but by the prospect of the steep capital gains taxes they would incur if they sold. 

However, the state's huge economy is expected to keep growing in 2025, and Levine sees reasons for optimism when it comes to supply, including some policy changes, particularly around accessory dwelling units.

"There's still a lot of public pushback to new developments, but we found that ADUs are a way to bridge some of that gap in a way that's more palatable to the other neighbors," Levine said.

Even so, most would-be buyers in California will continue to struggle with affordability. "People still want to buy and sell, but I think it's those long-term structural issues that are going to prevent us from bouncing all the way back to where we want to be," Levine said.

Florida: Buyers still flowing in as tech, finance sectors grow

Inventory in Florida surged in 2024 as rising home insurance rates, more intense weather damage and high home prices put a damper on the market. 

As a counterbalance to those issues, job growth has been strong, and in-migration remains robust, said Brad O'Connor, chief economist at Florida Realtors.

"The thing that's different now is that a lot of that [job growth] is in higher tech jobs and finance," O'Connor said. "Whereas tourism, our bread and butter, is actually not powering our resurgence since the pandemic."

O'Connor said active listings in the state are around 165,000 — well above the roughly 45,000 listings in early 2022, and about 50% below peak levels seen in 2008.

"What we have now, I think, is a lot healthier level of inventory," O'Connor said. "And you're starting to see that pattern throughout the Sun Belt, too."

Virginia: Return-to-office mandate could shift market dynamics

As the seat of the federal government, Virginia's housing market can sometimes be out-of-step with the rest of the country, said Ryan Price, chief economist for the Virginia Realtors association. 

Given the high number of civilian and military government workers in the state, Price said the market tends to underperform when the rest of the country is booming economically, and overperforms when it slows down.

On a national level, the market has been slowly shifting, but in Virginia, sellers still have a clear advantage. Inventory is increasing, however, which could lead to more balance — and more sales — in 2025.

One wildcard that could affect the local market is "return to work" policies. President-elect Donald Trump has repeatedly threatened to fire federal employees working remotely if they do not come into the office — something that would impact those who live farther from government office buildings and are weighing the possibility of a lengthy commute.

If Trump's threats translate to policy shifts, "then people are going to have a lot of tough decisions to make," Price said, adding that it could lead to an increase in short-term rentals closer to Washington D.C.