Where Home Prices Are Most Likely to Move in Q4 2025
Where Home Prices Are Most Likely to Move in Q4 2025
Q4 will be the last real barometer of where the U.S. market is heading before the 2026 buying season, and every serious buyer wants a reliable home price forecast Q4 2025 to act on.
Why Q4 2025 Is a Pivotal Quarter for U.S. Home Values
The fourth quarter of 2025 represents a critical juncture for the housing market, as recent data shows significant shifts in price momentum across different regions. According to the Federal Housing Finance Agency's latest report, U.S. house prices rose 4.5 percent between the fourth quarter of 2023 and the fourth quarter of 2024, setting the stage for what could be a more volatile final quarter in 2025.
Current national trends paint a mixed picture. CoreLogic's Home Price Index shows that home prices increased 3.4% year-over-year in December 2024, though momentum appears to be slowing. Meanwhile, J.P. Morgan Research projects house prices to rise 3% overall in 2025, suggesting modest but uneven growth ahead.
The regional housing market trends reveal stark disparities. While some metros show resilience, others face mounting pressure from inventory surges and affordability challenges. This divergence makes Q4 particularly important for buyers and sellers trying to time their moves strategically.
Macro Forces: Rates, Inflation & Fed Policy Heading Into Q4
Mortgage rates remain the dominant factor shaping housing affordability and demand as we approach Q4. J.P. Morgan analysts forecast that rates will decline modestly from ~7% to 6-6.5% over the next 12-24 months, but warn it's unlikely we'll see mortgage rates below 5%.
The disconnect between Federal Reserve policy and mortgage rates has become increasingly apparent. Morgan Stanley Research emphasizes that interest rate cuts by the Fed may not necessarily lead to lower mortgage rates. In fact, mortgage rates are actually 25 basis points higher than they were before the Fed cut rates by a full percentage point between September and December 2024.
J.P. Morgan Research expects the Fed to hold steady until June before cutting twice, bringing the target range for the policy rate to 3.75-4% by the end of the third quarter. Current mortgage data shows 30-year fixed rates at 6.90%, with the 15-year fixed at 6.20%, reflecting the persistent elevation in borrowing costs.
Builder confidence remains challenged by these conditions. The NAHB/Wells Fargo Housing Market Index held at just 32 in September, unchanged from August, indicating continued pessimism about market conditions heading into Q4.
Why Treasury Yields Matter More Than Fed Cuts
The relationship between Treasury yields and mortgage rates has become the critical link for housing affordability. As J.P. Morgan explains, mortgage rates are closely tied to long-term interest rates, particularly the U.S. 10-year Treasury note.
Morgan Stanley reinforces this point, noting that mortgage rates are more closely tied to the yields of 5-year and 10-year Treasury bonds than they are to the Fed funds rate. This explains why Fed rate cuts haven't translated into meaningful mortgage relief. For sustainable growth in home sales, Morgan Stanley estimates that mortgage rates would need to fall about 100 basis points to around 5.5%.
The 'Rate-Lock' Effect & Potential Unlock Catalysts
The mortgage rate lock-in effect continues to constrain inventory, with approximately 85% of U.S. homeowners holding mortgages with interest rates below 6%. This massive cohort of homeowners remains reluctant to sell and take on higher-rate loans.
J.P. Morgan's John Sim emphasizes that "The lack of supply is primarily a lock-in issue," noting that the situation won't change until mortgage rates back down toward 5%, or even lower. The gap between existing and new mortgage rates remains substantial, with the average rate on existing mortgages at 4.1%, while new loans are priced closer to 6.5%.
Inventory, Construction & the Supply-Demand Balance
Housing inventory dynamics are shifting dramatically as we move toward Q4. Fannie Mae's latest forecast shows total housing starts at 1,367 thousand units projected for 2025, with single-family starts expected at 1,013 thousand units.
Redfin reports that total inventory rose 16.7% year-over-year to its highest level in five years, marking a significant shift in market dynamics. The academic research underscores a critical trend: the responsiveness of new housing supply to changes in house prices has declined over the past five decades.
Realtor.com data confirms this inventory expansion, with active listings growing 20.9% year-over-year, exceeding 1 million active listings for the fourth consecutive month. However, the supply recovery has slowed, with inventory gains decelerating from 31.5% year-over-year in May to 20.9% in August.
The most recent data shows August 2025: 1,098,681 active listings, representing a substantial improvement from earlier in the year but still below pre-pandemic norms.
Falling Supply Elasticity Amplifies Price Swings
Recent academic research reveals a concerning trend for housing market stability. When housing supply is inelastic, a given interest rate change leads to greater adjustments in the price-to-rent ratio, almost entirely accounted for by the larger impact on house prices.
In New England, despite building permits reaching their highest level in four decades relative to population changes, supply constraints persist. This phenomenon explains why prices of single-family homes in New England rose roughly 50 percent from Q1 2020 to Q1 2024.
Metros & Regions Poised for Q4 Upside
The geography of housing strength has shifted dramatically, with northeastern markets emerging as clear leaders. Atlantic City, NJ tops Zillow's forecast with an expected +5.1% appreciation between February 2025 and February 2026.
CoreLogic data confirms this northeastern momentum, with Connecticut up 7.8% and New Jersey up 7.7% year-over-year. Redfin's analysis projects median U.S. home-sale price to rise steadily throughout 2025, ending the year 4% higher than 2024, with particular strength in these northeastern markets.
Northeast Momentum
The Northeast's outperformance reflects a combination of limited inventory and sustained demand. Kingston, NY shows projected growth of +4.7%, while Connecticut and New York metros continue to benefit from migration patterns.
The FHFA House Price Index reveals that Connecticut, New Jersey, and Wyoming each posted 8.3% appreciation in the most recent quarter. This strength extends beyond just pricing, as prices have risen fastest in places where migration increases have been the largest.
Midwest 'Sleeper' Markets
The Midwest emerges as an unexpected bright spot, with Chicago homes selling easily with multiple offers despite the broader market slowdown. Redfin economists note that the states with the highest increases year-over-year included several Midwest metros benefiting from relative affordability.
Redfin's forecast indicates median U.S. home-sale price to rise 4% by year-end, with Midwest markets expected to capture a disproportionate share of these gains due to their combination of affordability and job growth.
High-Risk Markets: Where Prices Could Dip
Several metros face significant downside risk heading into Q4. CoreLogic flags Provo-Orem, UT with 70%-plus probability of decline over the next 12 months. The most severe projections come from Louisiana markets, with Houma, LA facing -7.3% and Lake Charles, LA expecting -7.0% declines.
The FHFA data confirms this weakness, showing Cape Coral-Fort Myers, FL declined 6.3% in the most recent quarter, the largest metropolitan area price decline nationally.
Sun Belt Oversupply & Storm Risk
The Sun Belt's vulnerability stems from multiple factors converging simultaneously. Zillow economists note that while they expect home prices across most of Florida to rise, market observers remain skeptical given inventory buildups.
Redfin warns that natural disasters will start pushing down home prices in climate-risky places, including coastal Florida and hurricane-prone parts of Texas. Louisiana metros dominate the weakness list, with New Orleans, LA projected at -5.5%, adding to concerns about regional market stability.
Timing the Market: Is Q4 Still the Best Week to Buy?
Realtor.com data pinpoints the week of October 12-18 as the optimal buying window in 2025. During this period, buyers can expect to see 32.6% more active listings compared to the start of the year, with demand 30.6% lower than the summer peak.
The financial advantage is substantial, with prices potentially dipping 3.4% from their seasonal high during this week, translating to over $15,000 in savings on a median-priced home. Market dynamics have normalized considerably, with homes taking about 58 days to sell by July 2025, just slightly longer than the 2017-2019 average.
Redfin data reinforces this buyer advantage, noting that nearly half of today's sellers are giving concessions, just shy of the highest level on record.
Negotiation Leverage in a Concession-Heavy Market
The negotiation landscape has shifted dramatically in buyers' favor. As Redfin Premier agent Corey Stambaugh observes, "A lot of the people selling right now bought in 2021 or 2022, when home prices were near their height. Even though we advise them to list at today's market value, a lot decide to list high to recoup their money."
Redfin's Chen Zhao emphasizes the opportunity: "We know there's room to negotiate right now, so that's the best way to take advantage of the changing market." For sellers, the message is clear: pricing even more conservatively has become essential to attract buyers in this environment.
What This Forecast Means for Buyers, Sellers & Investors
The implications of Q4's market dynamics extend well into 2026. J.P. Morgan analysts note that declining mortgage rates are likely to be met with still strong demand for housing, keeping a floor on home prices and potentially allowing them to continue rising.
For buyers, the window of opportunity appears limited. FNBO projects that home prices will increase at a more sustainable pace of 2% to 5% annually, depending on the region. This suggests that waiting for dramatic price drops may be counterproductive.
Chestnut Mortgage's technology platform becomes particularly valuable in this environment. With over $85 billion in loan volume processed, Chestnut's AI-driven approach can identify opportunities across over 100 lenders, potentially securing rates approximately 0.5% lower than traditional channels—a critical advantage when every basis point matters.
Key Takeaways: Navigating Q4 2025 With Confidence
The fourth quarter of 2025 presents a market defined by divergence rather than uniformity. While national forecasts suggest modest appreciation, the reality varies dramatically by region and metro area. Buyers face a unique window where inventory has expanded but prices haven't collapsed, creating negotiation opportunities not seen in years.
For those ready to act, Chestnut's platform offers a strategic advantage. The company's ability to analyze options and secure lower rates while trimming unnecessary fees becomes crucial when navigating Q4's complex landscape. With mortgage rates likely to remain elevated and regional variations intensifying, having access to comprehensive market analysis and competitive financing options will separate successful transactions from missed opportunities.
The data points to a market in transition, where preparation, timing, and access to the right financing tools will determine success. Whether you're targeting appreciation in the Northeast, seeking value in the Midwest, or avoiding risk in oversupplied Sun Belt markets, Q4 2025 demands a strategic approach backed by comprehensive market intelligence and competitive financing solutions from Chestnut.
Frequently Asked Questions
Which regions are most likely to see home price gains in Q4 2025?
Northeastern markets appear strongest, led by areas like Atlantic City, NJ and Kingston, NY, with states such as Connecticut and New Jersey posting some of the highest year-over-year gains. Several Midwestern metros are also poised for steady appreciation thanks to relative affordability and solid job growth.
Which housing markets carry the highest downside risk heading into Q4 2025?
CoreLogic and other forecasts point to elevated risk in parts of Utah and Louisiana, including Provo–Orem, Houma, and Lake Charles. Weakness has also surfaced in select Florida metros like Cape Coral–Fort Myers, with climate and inventory pressures adding to volatility in some Sun Belt areas.
How will mortgage rates and Fed policy affect Q4 2025 home prices?
Mortgage rates track longer-term Treasury yields more than the Fed funds rate, so Fed cuts don’t always translate into lower mortgage rates. With many owners locked into sub-6% loans, sustained relief in rates is a key catalyst for more inventory and smoother price trends.
Is Q4 still the best time to buy a home in 2025?
Seasonality favors buyers in mid-October, when listings typically peak for the year and buyer demand eases from summer highs. Data for 2025 suggests more active listings, slightly softer prices, and widespread seller concessions, improving negotiation leverage for prepared buyers.
What do inventory trends suggest for late 2025?
Active listings have risen notably year over year, but supply remains below pre-pandemic norms and new construction is less responsive to price changes than in past decades. This mix can magnify local price swings, making metro-level conditions more important than national averages.
How can Chestnut help me navigate Q4 2025 opportunities?
Chestnut’s AI compares offers from 100+ lenders to find competitive options fast, often reducing borrower rates by about 0.5% and helping close roughly 40% faster. You can get an instant quote in under two minutes and explore buying guidance in resources like https://chestnutmortgage.com/resources/what-to-know-before-buying-your-first-home.
Sources
https://www.fhfa.gov/document/FHFA-HPI-Quarterly_02252025.pdf
https://www.corelogic.com/intelligence/us-home-price-insights-february-2025/
https://www.jpmorgan.com/insights/global-research/real-estate/us-housing-market-outlook
https://www.morganstanley.com/insights/articles/fed-rate-cut-mortgage-rate-impact-2025
https://www.jpmorgan.com/insights/global-research/economy/fed-rate-cuts
https://www.nahb.org/news-and-economics/housing-economics/indices/housing-market-index
https://www.redfin.com/news/home-price-forecast-decline-2025/
https://finance.yahoo.com/news/redfin-2025-predictions-pent-demand-130000566.html
https://www.noradarealestate.com/blog/best-time-to-buy-a-house-in-2025-is-between-october-12-to-18/
https://chestnutmortgage.com/resources/what-to-know-before-buying-your-first-home