Redfin’s latest housing market prediction for 2025 suggests a tough year for first-time homebuyers, with more people choosing to rent as a result [1]. Why?
- Rising Home Prices: Prices are expected to climb another 4%, continuing the trend seen in 2024, while inventory remains limited.
- High Mortgage Rates: With rates near 7% and minimal cuts expected, affordability will remain a challenge for first-time buyers.
- Shifting Demographics: Younger Americans, especially Gen Z, are cutting homeownership out of their plans, choosing to live with family or rent into their 30s.
What does this mean for real estate investors?
Strong rental demands
Let’s say outright that it’s very good news for anyone hoping to earn passive income from real estate. The equation is a very simple one: the more demand there is for rentals, the more opportunities there are for you, the investor. The increased numbers of renters will keep the rental market buoyant, even if rental growth may slow somewhat due to an expanding supply of new housing units in 2025.
For investors, this shift in the market is a great chance to maximize returns, especially if you’re open to passive investment options. You don’t need to be a hands-on landlord to benefit from this growing demand—platforms like Ark7 allow you to invest in fractional real estate without worrying about property management.
Recommended: What is fractional real estate?
Renters want value for money
As renters become more value-conscious, investors must consider current rental trends to stay ahead. Today’s renters are more sophisticated, seeking high-quality, affordable accommodations in desirable neighborhoods. On average, renters are older than in the past, with a median age of 39, and they’re staying in their rentals longer[2]. One in six renters now stays in the same home for a decade or more, demonstrating a shift toward long-term living, putting down roots, and raising families in rental properties.
For these reasons, renters are expecting the same things from their rentals and rental neighborhoods as buyers. Today, renters want comfortable, amenity-rich homes in neighborhoods that offer a sense of belonging. [4]. The typical image of a renter as a transient person without concern for what’s around them just doesn’t correspond to current reality.
While affordability remains the top concern for renters, they know how to do their research and find accommodations that offer a good balance of financial value and quality. As an investor, it’s important to keep these preferences in mind when choosing where and what to invest in. Look for properties that appeal to these value-driven renters by offering both affordability and high-quality living spaces.
Final Thoughts
2025 is set to be a renter’s market, which means more competition for the best rental properties. Investors who understand what renters want: value, comfort, and community will be best positioned to succeed. With more renters entering the market, now is the time to invest in properties that meet these demands and reap the benefits of a growing and evolving rental market.
Sources: [1] Redfin [2] Harvard Joint Center for Housing Studies [3] Redfin [4] Venn
