The real estate investment landscape is looking brighter and more promising as 2025 begins. Following a period of significant changes resulting from the pandemic, real estate investors are now benefiting from more stabilized borrowing costs and a clearer economic outlook. As the housing market steadies and for-sale inventory returns to normal levels, we expect more favorable buying opportunities to emerge in some markets.
While investors haven’t seen the significant pullback in mortgage rates many had hoped for when the Federal Reserve began its rate-cutting cycle, several factors are coming together that could make 2025 a year of opportunity for investors.
Here are a few things to know as the 2025 housing market kicks off.
Election Uncertainty Is Behind Us—and It’s Fueling Momentum
Uncertainty surrounding elections can significantly impact major capital and investment decisions. We saw a build-up of decisions that did not happen for a few months leading up to the election. There’s always going to be a psychological component to the housing sector and our investors were seeking more certainty on housing, interest rates, and economic policies.
With the political landscape now more transparent, we’re seeing a first-hand tangible uptick in deal-making and long-term planning. While there’s still uncertainty surrounding the 2025 fiscal policy agendas, some investors who had delayed decisions last year are jumping back into the market.
Improving Investor Sentiment
Among single-family investors we surveyed in Q4 2024, 76% say they are either “very likely” (55%) or “somewhat likely” (21%) to buy at least one investment property in 2025.
This marks improving investor confidence: In our Q3 2024 survey, just 60% of single-family investors said they were “very likely” (38%) or “somewhat likely” (22%) to buy at least one investment property in the next 12 months.
While single-family investors may not be overly bullish, they are cautiously optimistic. 76% expect at least mild home price appreciation in their local market in 2025, and 84% plan to raise single-family rents this year.
Inventory Is on the Rise
Total active listings for sale are beginning to rebound in certain parts of the country, even as new listings remain subdued.
Much of this rise in active inventory has been concentrated in the Southwest and Southeast, areas that experienced significant demand during the pandemic housing boom. As active inventory climbs, investor buyers in these regions gain some negotiating power.
Analysts at LendingOne expect year-over-year growth in U.S. active inventory to continue in 2025. It might not be a big inventory jump, but it will help move housing into a more balanced market.
Big Picture
As the U.S. housing market evolves in early 2025, I expect investment activity to rise and investors to adapt to the changing market. Institutional and retail investors are recalibrating to meet the demands of a market characterized by stabilized interest rates and normalizing inventory. While challenges persist, particularly around affordability and supply, opportunities are available for those with more value-added strategies. Inventory and days on the market of properties requiring renovation have increased, which is positive for real estate investors going into the year.