Veros Sees Only Modest Home Price Increases

Veros Real Estate Solutions (Veros®) released its Q1 2025 VeroFORECASTSM. The forecast projects an average nationwide home price appreciation rate of 2.4% over the next 12 months. This is a modest decline from the previous quarter’s forecast of 2.7%.

VeroFORECAST evaluates home prices in over three hundred of the nation’s largest housing markets, and Veros is committed to the data science of predicting home value based on rigorous analysis of the fundamentals and interrelationships of numerous economic, housing, and geographic variables pertaining to home value.

The fundamental conditions shaping the housing market largely mirror those of the prior quarter. Mortgage rates, a dominant force in the market for the past few years, are projected to remain high, with limited prospects for near-term reduction. Inflation continues to be a significant concern, as evidenced by the recent increase in the core Personal Consumption Price Index for February 2025, and this is before the full impact of tariffs is felt. This stickiness in core inflation will likely prompt the Federal Reserve to keep interest rates at their present levels for the foreseeable future. While the labor market is currently stable, the consequences of layoffs could emerge in the coming months.

The spring selling season is now underway, and inventory levels are higher than last year. Given the widespread expectation of minimal relief on mortgage rates, both buyers and sellers appear to have adjusted their expectations. The increase in available homes provides buyers with more negotiating leverage, suggesting that average home prices across the U.S. will increase only modestly, as indicated by the VeroFORECAST.

However, this nationwide outlook masks significant regional differences. The Northeast and Midwest continue to be the strongest markets, driven by low inventory and relatively more affordable housing compared to the sunbelt. Furthermore, the slowdown in remote work and the return to office mandates have largely stemmed the outflow of people from these regions. Further, retirees seeking to relocate from colder climates are facing affordability challenges. Rising insurance and HOA fees are also dampening housing demand in Florida. Significant new construction in the sunbelt states has created ample supply, keeping prices in check and even leading to depreciation in some markets.

As buyers and sellers engage in the traditionally busy season, the national housing market presents a picture of cautious optimism. The hope for easing interest rates and prices is tempered by concerns over tariffs, persistent inflation, and broader economic anxieties that could hinder a more robust recovery.

The top ten housing markets for the next year are projected to be: Rockford and Springfield in IL, Manchester (NH), Rochester and Buffalo in NY; Hartford, New Haven, and Norwich in CT; and Lancaster and York in PA. These smaller metros provide relatively more affordable housing compared to the larger metros.

The ten weakest housing markets are concentrated in the South, with four each in Florida and Texas, and two in Louisiana. This downturn is attributed to a combination of factors: a rise in homes for sale empowering buyers and driving down prices, significant new construction in Texas and Florida adding to the supply glut, a cooling of pandemic-era migration due to more return-to-office mandates, and escalating insurance costs stemming from these regions’ susceptibility to natural disasters.