Virginia’s housing market in 2024 was marked by a slight uptick from the slowdown in 2023. Home sales activity increased modestly despite high mortgage rates. The additional sales were mostly driven by rising inventory. As we head into 2025, let us look at what could be on the horizon in the housing market this year.

1. Home sales activity is expected to improve in 2025 driven by strong demand and additional inventory.

While potential buyers grapple with the elevated mortgage rates and climbing home prices, the reality is demand in the market remains strong and many existing homeowners have significant equity built up in their homes depending on when they purchased. As the lock-in effect loosens over time and more inventory becomes available, this will likely boost move-up buyer activity in the coming year. Additionally, Virginia’s job market has remained resilient and is growing steadily. Moreover, the Federal Reserve projects unemployment to remain at historically low levels next year. As people feel more secure in their jobs, the continued job market strength will likely drive more demand. This rising demand, coupled with easing supply constraints, and more active listings that have led to higher levels of housing inventory in the commonwealth will likely keep market activity brisk in 2025 relative to 2024.

2. Home prices will continue their upward trajectory albeit at a slower pace in most markets around Virginia.

Overall, we anticipate upward pressure on home prices to persist in the 2025 market in Virginia, however, likely at a slower pace than the market has seen in 2024. This will be owing to the expected moderation in home price growth along with an easing of supply constraints due to new housing growth in 2025 and more sellers entering the market. As return-to-office mandates are enforced in the new year, housing markets near job centers will likely experience a reinvigorated demand which would drive up prices more in these local markets.

3. Mortgage rates are likely to fall modestly by the end of 2025; but they will remain volatile along the way.

We project mortgage rates to decline from current levels by the end of 2025, but the path will be bumpy, and the pace is likely to be slow. There are several factors keeping mortgage rates elevated including climbing 10-year treasury yields, sticky inflation, a dialed back timeline for Federal Funds Rate cuts, and offloading of MBS (mortgage-backed security) holdings by the Fed. The housing market is very rate sensitive in the current high-price and elevated rate environment. As 2025 progresses, any improvement to rates will likely boost sales, and when rates climb, sales activity will likely be muted.

For more information on housing, demographic and economic trends in Virginia, be sure to check out Virginia REALTORS® other Economic Insights blogs and our Data page.