For many in the Seattle-area real estate market, 2024 was a year of staying put.
Elevated mortgage rates and high home prices kept would-be home shoppers on the sidelines. Those same factors discouraged homeowners from trying to sell, knowing they would have to buy a new home in a pricey market. The cost of borrowing money hit developers, too, keeping them from pursuing new apartment projects to add to the Seattle-area housing supply.
In a few ways, experts anticipate a jolt to the market in the new year with an expected dip in interest rates. But the region’s affordability challenges are likely to remain stubbornly stagnant. Here are five predictions for the Seattle-area real estate market in 2025:
1. Home prices will continue to climb
Let’s get this out of the way first: It’s unlikely to get much easier to afford a home in the Seattle area.
King County home prices have more than doubled since the 2008 Great Recession. Then COVID supercharged that growth, spiking prices by 20% or more in a single year in some Seattle suburbs.
That price growth has slowed since mortgage rates began to climb in 2022, but prices remain high for many first-time buyers struggling to afford a home. That’s due to a limited number of homes for sale and a still-growing population.
Seattle-area home prices could climb 4% to 5% next year, in line with the rate of growth this year, said Windermere principal economist Jeff Tucker.
More affordable cities, such as Tacoma, Renton, Burien, Des Moines and Kent, will continue to attract first-time homebuyers struggling to budget for the high cost of homeownership in the region, Tucker said. Other shoppers may turn to condos in Seattle as a more affordable option.
Homeowners who can tap into the equity in their properties and first-time buyers in high-paying tech jobs will find ways to manage those prices, Tucker predicted. But “for millennials and, at this point, a lot of zoomers, thinking about buying their first home, it’s still really expensive.”
2. Mortgage rates to hover around 6% to 6.5%
Beyond prices, the big question on potential homebuyers’ minds is mortgage rates.
This year, mortgage rates averaged a high of 7.2% in May and settled at 6.6% by mid-December, offering a bit of relief but nothing close to the below 4% levels of the early pandemic years.
Economists nearly unanimously expect rates to hover in the 6% range next year.
National Association of Realtors Chief Economist Lawrence Yun projects a “new normal” around 6%. Danielle Hale, chief economist at Realtor.com, expects an average of 6.3% throughout 2025. In line with those projections, Wells Fargo also forecasts rates will fall to 6.4% in 2025 and Tucker, from Windermere, projects rates will be just below 6.5%.
Even with prices and mortgage rates not budging much, economists do expect home sellers and buyers to make more deals.
The so-called “lock-in effect” of homeowners staying put to keep their low interest rate “is waning over time,” Hale said during a recent panel hosted by the National Association of Realtors.
Here in the Puget Sound region, the final months of the year have seen a burst of home sales compared with a year ago, according to data from the Northwest Multiple Listing Service.
Tucker expects that trend to continue, boosting sales by 10% in 2025.
“People who really want to or need to move … can put it on pause for a year or two or three,” Tucker said. But they can’t wait forever.
“Those people who have put it on pause are going to start to feel the urgency to move,” he said.
Yet any uptick may be modest. Wells Fargo forecasts a slight increase in home sales nationwide, but “there’s a difference between an improvement and a recovery,” said economist Jackie Benson in an interview. Benson does not expect home sales volumes to return to 2019 or 2020 levels.
“That lethal combo of high mortgage rates and rising prices is apt to keep a lid on housing demand and supply in Seattle and nationwide,” Benson said.
3. Rents to remain high, but slow to rise
It may not feel like it to many Seattle renters, but rents across the city are not on a dramatic incline. In fact, overall rents were basically flat this year and are expected to stay level in 2025.
Seattle apartment rents climbed less than half a percent over the past year, according to November data from the rent-tracking firm Apartment List.
The reason for the price stability: an influx of newly built apartments in Seattle that’s expected to continue into the new year. About 13,000 apartments are under construction in Seattle, many on track to hit the market in the coming year, said Apartment List senior research associate Rob Warnock.
That construction has “relieved a lot of pressure on the rental market the past two years,” Warnock said.
In a relatively cool market, landlords often offer specials like a free month of rent rather than dropping the rent for a unit. Those concessions have “definitely increased in popularity over the last couple of years.” As long as rent growth remains flat, Warnock expects those discounts, “are going to continue to get more popular.”
The flood of supply won’t go on forever. As interest rates climbed in recent years, fewer developers sought permits for apartment towers. Compared with 2023, multifamily permit applications are down about 10% through October in the Seattle area, a significant decline although still a better picture than a 16% slide nationwide, according to Wells Fargo.
Because apartment buildings take several years to finish, that means that starting around 2026, fewer new apartments will hit the market and rents could climb again.
Some tenants have already seen rent increases.
Rents rose more on the Eastside than in Seattle this year, with year-over-year increases ranging from 3% in Issaquah, Redmond and Kirkland to 5% in Bellevue.
Single-family home rents have also ticked up. Compared with a year earlier, the cost to rent a single-family house in the Seattle area climbed 3% in October, the latest data available from CoreLogic. The median three-bedroom single-family home rented for about $3,600.
Plus, nearly two-thirds of Seattle-area renters reported a rent increase of some kind in the past year, according to a recent census survey.
As some tenants continue to struggle, the state is likely to see another push to limit rent hikes in the new year.
When the state Legislature returns to Olympia in January, tenant advocates plan to once again seek legislation to limit rent increases. Lawmakers considered a proposal during the last legislative session to limit annual rent hikes to 7%, with exemptions for new construction, but that bill ultimately failed.
4. Office market woes will continue
There is no pre-COVID normalcy in sight for Seattle’s commercial real estate market, especially the city’s many partially empty office towers.
The number of people working in downtown offices remains at about 56% of prepandemic levels, according to October foot traffic numbers reported by the Downtown Seattle Association.
Demand for Seattle office space fell from 2022 to 2023, then climbed 12% so far in 2024, according to VTS, a company that tracks demand for office space based on tenant tours of office space. But that demand is still less than half of pre-COVID levels, Max Saia, head of investor research, said in a statement.
Demand for office space from tech companies remains lackluster in Seattle while rebounding more on the Eastside, Saia said. And across the nation, more office loans continue to come due, putting their owners at risk of financial distress. In one high-profile example of those struggles, well-known Seattle developer Martin Selig has struggled to repay loans on office buildings across downtown Seattle.
Even so, as employers continue to cajole employees back to the office, market observers expect some companies to ratchet up the amount of office space they lease.
So far this year, the amount of office space leased in the Seattle area remains below 2019 levels but is up 23% from 2023, according to the commercial real estate firm JLL.
With office landlords still willing to cut deals on space, JLL research manager Nick Menghini said he expects “rising leasing momentum to continue” as office tenants look to take advantage of those conditions.
5. Debate continues over building new housing
To address the region’s sky-high housing costs, nearly everyone agrees the Seattle area needs more new homes. But the debate over just where those homes should go is likely to continue in 2025 — and far beyond.
In Seattle, the new year will bring into focus a conversation about where the city plans to focus new housing development. The Seattle City Council is set to take up Seattle’s next comprehensive plan, a 20-year planning document that contemplates upzones to allow more density in many areas of the city.
Some neighborhood groups have begun to organize against changes on their blocks, while housing supporters argue the plan is far shy of what the city needs to meet the crisis.
And there are even more uncertain skies ahead for the homebuilding industry.
Incoming President Donald Trump promises deregulation and tax cuts — welcomed by developers — but he has also vowed to undertake an immigration crackdown that could worsen the construction industry’s labor shortage. Trump has also floated tariffs that, if imposed on products like lumber and steel, could drive up the cost of building all sorts of housing.
That means even as local governments open more land to housing, the costs of raw materials could climb. And if those costs increase, “it’d be reasonable to assume that home building costs would rise,” said Benson, from Wells Fargo, “and that may bleed into higher home prices.”