After years of volatile price increases, Goldman Sachs forecasts a more balanced housing market in 2025. According to a newly released report, the investment banking giant expects home prices across the U.S. to stabilize due to easing inflation, lower mortgage rates, and a gradual return to normalcy in supply and demand dynamics.
The firm’s analysts say the real estate sector, which has been overheated since the pandemic era, is showing signs of cooling off — a trend that will likely continue over the next 12 months.
According to Goldman Sachs’ latest housing outlook, “We expect national home price growth to slow to a modest pace in 2025, signaling a return to historical norms.”
A Look Back: Why Home Prices Soared
Since 2020, home prices in the U.S. have surged by more than 40% in some regions. A combination of pandemic-related shifts, ultra-low interest rates, high demand, and limited housing inventory led to one of the most competitive housing markets in American history.
Goldman Sachs analysts noted that the 2020-2022 boom was primarily driven by:
- Remote work encouraging relocations to suburban and rural areas
- Near-zero interest rates making mortgages more affordable
- Supply chain disruptions slowing new construction
- Record-high demand from millennials entering homeownership
These factors created a perfect storm that pushed prices beyond sustainable levels in many urban and suburban areas.
Signs of Stabilization Already Visible
By mid-2024, early signs of cooling started to appear. The Federal Reserve’s interest rate hikes to control inflation led to higher mortgage rates, decreasing the purchasing power of many prospective buyers. Additionally, more housing supply entered the market, and some cities began to see price corrections.
According to Redfin, over 40% of homes in some major metros sold below asking price in Q2 2024, a clear indication that bidding wars are slowing down.
“The market is becoming more rational,” says Redfin’s Chief Economist. “Sellers can no longer name their price. Buyers have more room to negotiate.”
Goldman Sachs’ 2025 Prediction: Slow and Steady
Goldman Sachs’ outlook for 2025 doesn’t suggest a crash, but rather a flattening of the curve. Their analysts predict national home prices will either remain flat or increase modestly — between 1% to 3% — depending on local market factors.
The firm attributes this forecast to three primary conditions:
- Mortgage Rates Stabilizing: As inflation cools, the Federal Reserve is expected to halt further interest rate hikes or potentially cut rates slightly. This would bring 30-year mortgage rates back down from their recent highs above 7%.
- Inventory Catching Up: Builders have increased construction in response to high demand. Although still below pre-2008 levels, new home supply is gradually improving.
- Buyer Fatigue and Economic Uncertainty: With affordability stretched, fewer buyers are willing to overpay, especially amid economic uncertainties and job market concerns.
Regional Differences Will Remain Key
While the national average may level off, Goldman Sachs stresses that real estate remains highly local. In high-demand cities like Austin, Miami, and Nashville, home prices may continue to climb slightly due to population growth and job creation. Meanwhile, overpriced markets like San Francisco and Seattle could see minor declines or plateauing prices.
“Investors and homebuyers should focus on regional data rather than national headlines,” said the report.
For example, Zillow data shows that Boise, Idaho — one of the fastest-growing markets during the pandemic — saw home prices fall by nearly 6% year-over-year in 2024, correcting from unsustainable highs.
What This Means for Buyers and Sellers
Goldman Sachs’ prediction offers both caution and opportunity. For buyers, 2025 might be a better time to enter the market without fear of rapidly escalating prices. For sellers, pricing competitively will become more important than ever.
Buyers are advised to:
- Get pre-approved for mortgages early
- Monitor interest rate trends
- Avoid overbidding in cooling markets
Sellers should:
- Be realistic with listing prices
- Expect longer selling times
- Invest in minor home improvements to attract buyers
“It’s no longer a seller’s market,” says housing analyst Lisa Munroe. “We’re entering a more balanced phase where preparation and strategy matter again.”
Investment and Construction Outlook
Stabilizing home prices also carry implications for real estate investors and builders. Developers are now focusing on multi-family units and affordable housing, given the continued demand for rentals.
Goldman Sachs also highlights that real estate investment trusts (REITs) may perform better in 2025, as the volatility of the last few years recedes and rental income becomes more predictable.
“With stabilization comes confidence,” the report states. “Capital will likely return to real estate segments that prioritize sustainability and urban infrastructure.”
Conclusion: A Return to Normalcy
The U.S. housing market has been through a dramatic ride over the past five years. As the economy finds a more stable footing and inflation eases, the housing sector is poised to follow suit.
Goldman Sachs’ projection of home price stabilization in 2025 signals hope for first-time buyers and cautious optimism for sellers and investors. Though the frenzied bidding wars may be over, smart strategies and localized knowledge will remain essential in navigating the market.
As we move toward 2025, the dream of homeownership may once again feel within reach — not because of falling prices, but because of a return to balance.
Also Read – Zillow Predicts Home Prices Will Grow—but Slower in 2025
