5 types of homes expected to drop in value by the end of 2025

Whether you’re looking for a long-term investment and want to make sure you don’t spend a fortune, or you’re thinking about buying your first home, it’s important to choose the right type of property. Currently, interest rates and property prices in general are still high, but some types of homes could lose value over the next 12 to 18 months.

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That could be good news if you’re a potential buyer looking for something affordable for the long term. But it could also be problematic for sellers and short-term investors alike. After all, falling prices mean lower returns for both.

GOBankingRates spoke to real estate experts about what types of homes they think will lose value by the end of next year. While these are just predictions and anything can happen, here’s what they think.

Condominiums and townhouses

Condos were once extremely popular, especially among retirees and people looking for a vacation property with lower maintenance, but they may be falling out of favor with buyers and demand just isn’t keeping up.

“I believe condos are more likely to lose value in many places over the next year. This will be primarily due to an oversupply of this type of housing in certain markets,” said Danny Johnson, real estate expert at Danny Buys Houses Texas. “Condos have been the preferred housing type for many builders for some time. It’s simply a matter of supply and demand.”

According to Alex Capozzolo, a licensed real estate agent and co-founder of Brotherly Love Real Estate, apartment prices in urban areas could also drop sharply, primarily due to oversupply, higher vacancy rates and lower demand as more people work from home.

“With the increase in telecommuting arrangements, individuals and families are no longer tied to living near their workplace or the city center,” he said. “This could lead to a shift from urban areas to suburban or rural areas, where property prices tend to be lower.”

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Older suburban houses

As new construction becomes more popular, the traditional wooden houses you see in all these old neighborhoods may also lose value. This is especially likely for older homes.

The story goes on

“The only type of home that is constantly being built are large homes in suburbs and fringe areas. While brand new homes of this type are quite expensive – one of the reasons they are still being built is because they are so profitable – 10 to 30 year old homes in suburbs have a lot of trouble retaining their value,” said Martin Orefice, CEO of Rent To Own Labs.

“This could be a great buying opportunity for prospective homeowners, but it could also be bad news for retirees who use their home equity as a nest egg.”

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Certain luxury properties

A luxury home is any property that costs about two to three times the local average price. These homes are currently in high demand, which has led to oversupply in certain real estate markets. Because of this – and because of high interest rates and fewer buyers overall who can afford such homes – Capozzolo believes they too should expect a price reduction.

“Because luxury properties are often purchased by high net worth individuals as an investment or second home, fluctuations in the economy or financial markets can severely impact their purchasing power,” he said.

Even wealthy buyers might hesitate to purchase these homes and opt for cheaper options – but like anything else, it depends on the market and the buyer.

Real estate in areas with high unemployment

Many people are working remotely, but the local unemployment rate can still impact property prices. The higher the unemployment rate, the greater the potential loss in value. If locals are already struggling to make ends meet, this can lead to lower property prices – due to lower demand.

“The uncertainty in the job market and the financial instability facing many households are further exacerbating the downturn in the housing market,” said Brandon Beatty, real estate expert at Ready House Buyer.

This makes it difficult for both buyers looking for an affordable home and current homeowners looking to get the most value when selling their home.

Holiday homes or second homes

According to the Federal Reserve Bank of St. Louis, the average selling price for a home is just over $500,000. Much cheaper homes can be found, especially in rural or sparsely populated areas, but even then, purchasing a second home or vacation home is out of reach for many.

Capozzolo believes that these types of homes will lose value in the coming years.

One of the main reasons for this is simply that more and more buyers are being more cautious in their purchasing decisions. If they already have a primary residence, they may choose to keep it rather than buying a second property for seasonal or vacation purposes. This is particularly plausible because this second property, depending on the location, can come with high insurance and maintenance costs.

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This article originally appeared on GOBankingRates.com: 5 Types of Homes Expected to Decline in Value by the End of 2025