New Year, New Market: What to Expect in the 2025 Housing Market

As the calendar turns to 2025, homeowners, buyers, and real estate professionals alike are gearing up for another dynamic year in the housing market. For those in North Alabama and South Tennessee, understanding emerging trends and predictions is key to navigating the year ahead. At Definitive Valuations, we’re here to provide insights into what you can expect in the 2025 housing market and how it may impact home values in our region.

Trend #1: Continued Population Growth in North Alabama

North Alabama, particularly the Huntsville area, continues to see a steady influx of new residents. With Huntsville’s growing reputation as a hub for aerospace, technology, and defense industries, the demand for housing remains robust. This population growth is expected to keep prices relatively steady in such a high demand area. Some areas are experiencing price cuts while others are still on the up and up.

What This Means for Home Values: With a current months supply of approximately 4.1, the local greater Huntsville real estate market is in a mostly balanced market with buyers having a bit more negotiating power overall. Sellers in specific areas are likely to benefit from increased competition among buyers which could result in higher sale prices, but sellers overall should keep in mind that the market is not like it was 2-3 years ago; homes don’t just sell in a day for over asking anymore. Appraisers will need to account for these trends, particularly in areas experiencing rapid development.

Trend #2: Stabilizing Interest Rates

After several years of huge fluctuations, it seems that many economists predict that interest rates will stabilize in 2025. Fannie Mae has the average 30-year fixed rate at 6.6% in the beginning of 2025 in their December Housing Forecast and 6.1% by 2026. While rates may remain higher than the historic lows of recent years, a more predictable rate environment could encourage buyers who were previously hesitant to enter the market.

What This Means for Home Values: Stable interest rates could lead to a more balanced market. While prices may not skyrocket, steady demand from buyers should keep home values strong, particularly in markets like North Alabama and South Tennessee, where affordability remains a key draw.

Trend #3: Increased Focus on Energy Efficiency

With growing awareness of sustainability and rising energy costs, more buyers are prioritizing homes with energy-efficient features. Solar panels, energy-efficient windows, and smart home technology are increasingly seen as valuable upgrades.

What This Means for Home Values: Homes with green features may see a premium in their appraised values. If you’re considering selling, investing in energy-efficient improvements could boost both your home’s marketability and its appraised value.

Trend #4: The Resurgence of Suburban Living

While urban living remains popular, the trend toward suburban and rural areas, which surged during the pandemic, is far from over. In areas like South Tennessee and the outskirts of Huntsville, Alabama, buyers are drawn to the promise of more space, lower costs, and a quieter lifestyle.

What This Means for Home Values: Suburban and rural areas could experience steady value growth as buyers continue to seek these locations. Appraisers will need to carefully evaluate local market conditions to ensure accurate valuations.

Trend #5: Rising Construction Costs

Building new homes remains expensive due to high material costs and ongoing labor shortages. This puts additional pressure on the resale market as buyers look for alternatives to new construction.

What This Means for Home Values: Existing homes may see increased demand, especially those in move-in-ready condition. Appraisals should reflect the added value of properties that require minimal updates or repairs.

How to Navigate the 2025 Market

For Buyers:

• Act quickly in competitive markets. Partner with a real estate professional who knows the local area well.

• Understand that you have the upper hand overall and that the general market (at least in North Alabama) is favoring buyers for the most part, but with such a popular growing area, sellers do still have some negotiating power as well.

• Consider homes with energy-efficient upgrades, such as energy-efficient windows, for long-term savings.

For Sellers:

• Highlight features that align with current trends, such as green technology or proximity to key employers and popular locations and roads.

• Work with an experienced appraiser to ensure your home’s value is accurately assessed.

For Homeowners:

• Monitor your home’s value regularly, especially if you’re considering refinancing or accessing home equity.

• Stay informed about neighborhood and general area developments that could influence your property’s value.

Conclusion

The 2025 housing market promises to be another exciting chapter for North Alabama and South Tennessee. Whether you’re buying, selling, or simply keeping an eye on your investment, staying informed about market trends is crucial. At Definitive Valuations, we’re committed to providing accurate, reliable appraisals to help you make confident decisions in this evolving market. Here’s to a successful year in real estate!