7.15.25
The real estate and construction industries are pivotal to global economic development, employing millions and shaping the landscapes of our cities and communities. In 2025, these industries are navigating a complex mix of economic pressures, technological innovation, and evolving consumer preferences. Here’s a deep dive into the most significant trends currently transforming real estate and construction.
Even more information on this industry is available! Check out our Real Estate Industry Center.
Plunkett’s Real Estate & Construction Industry eBook, latest edition.
1. High Interest Rates and the Housing Affordability Crisis
The housing market is under significant pressure from sustained high interest rates. As of mid-2025, mortgage rates have risen to levels that make homeownership unattainable for many households, including dual-income families. The median price for a new home now exceeds $420,000, and homeownership rates have declined to 65.6% from their 2006 peak of 68.9%.
This has driven a surge in demand for rental housing. In 2024 alone, a record-breaking 500,000 new apartment units were completed, with the national vacancy rate at 7.1%. Yet, rents remain high, and the cost gap between renting and owning has widened, making renting the more affordable option for many Americans.
2. Digital Disruption and the Rise of Online Real Estate Services
Digital transformation continues to reshape the real estate landscape. Platforms like Zillow, Redfin, and LendingTree offer consumers the ability to search for homes, compare mortgages, and apply for loans entirely online. These services are challenging traditional real estate broker models.
A significant development was a 2023 court ruling awarding $1.8 billion in damages to sellers who overpaid commissions to traditional brokers, spurring broader calls for commission reform. Broker fees are now trending downward, often negotiated between 3% to 5% of the home’s sale price, down from the historical 6%.
3. Green Building and Sustainability Take Center Stage
Sustainability is now a mainstream priority in real estate development. Builders are increasingly adopting LEED and Green Globes certifications, integrating energy-efficient appliances, improved insulation, solar panels, and water-saving technologies. Cities like New York have passed ambitious mandates such as Local Law 97, requiring large buildings to reduce emissions by 40% by 2030.
Zero-energy homes—buildings that produce as much energy as they consume—are gaining ground, particularly in sunny regions like the American Southwest. Though initial construction costs may be 10-20% higher, these homes promise long-term savings on utilities and greater resilience amid rising energy prices.
4. Technological Innovation: Robotics, Prefabrication, and 3D Printing
The construction sector is embracing modernization through off-site prefabrication, robotics, and 3D printing. Panelization, where walls, staircases, and even entire rooms are fabricated in factories and assembled on-site, is helping to address labor shortages and reduce costs. Firms like PulteGroup and Lennar are adopting these methods, and startups like ICON are building 3D-printed homes using proprietary concrete technologies.
Robotic assembly lines, such as those employed by Blueprint Robotics and Project Frog, are now producing entire building modules, further accelerating timelines and improving quality control.
5. Smart Homes and IoT Integration
The Internet of Things (IoT) is revolutionizing how homes are designed and operated. Smart thermostats, lighting systems, security devices, and voice-activated controls are becoming standard features in new developments. Companies like Amazon (through Alexa and Ring) and Google (via Nest) are expanding their smart home ecosystems, offering consumers improved energy efficiency and convenience.
6. Demographic Shifts and Aging in Place
The aging Baby Boomer generation is reshaping housing demand. More than 10,000 Americans turn 65 every day, creating strong demand for senior living facilities, retirement communities, and “universal design” homes—residences adapted for aging in place with features like step-free entryways, wider doorways, and touch-free appliances.
Builders and zoning authorities are increasingly creating multigenerational housing solutions, such as “granny flats” or attached living units, to accommodate older adults living with family while maintaining some level of independence.
7. The Evolution of Retail and Mixed-Use Developments
Retail real estate is adapting to ecommerce and changing consumer habits. While some malls face declining foot traffic and rising vacancies, others are transforming into lifestyle hubs featuring luxury retailers, restaurants, fitness centers, and even residential units. Projects like The RO in Houston and Victory Park in Dallas illustrate the growing trend toward vertical, mixed-use developments that combine work, living, and leisure in a single footprint.
High-end malls are also incorporating Instagrammable experiences and partnering with luxury brands to attract younger, affluent shoppers. Meanwhile, defunct retail spaces are being repurposed into fulfillment centers, clinics, or educational facilities.
8. Remodeling and DIY Renovation Trends
While large-scale construction has slowed due to high material and labor costs, the remodeling market is stabilizing after post-pandemic volatility. Homeowners are investing in energy-efficient retrofits, solar installations, and dedicated home office spaces. The rise of do-it-yourself (DIY) renovations, particularly among younger homeowners, has spurred demand for short-term rentals of construction tools and equipment.
There is also increased interest in universal design renovations, as aging populations seek to remain in their homes longer, further fueling demand for accessible remodeling features.
9. The Urban-Suburban Tug-of-War
The long-term impact of remote work on urban planning is still unfolding. While some predicted a mass urban exodus, many professionals still prefer walkable city living. However, remote-capable knowledge workers are increasingly relocating to smaller cities offering high quality of life, affordable housing, and strong internet infrastructure. This has driven growth in areas like Boise, Idaho; Bryan-College Station, Texas; and parts of Florida and Utah.
Meanwhile, some cities are rethinking their infrastructure and zoning to promote transit-oriented, mixed-use developments near commuter rail hubs—a model that fosters sustainable urban living.
10. Challenges in International Markets: Spotlight on China
In China, once-booming real estate markets are now under stress. After years of overbuilding and speculative investment, many projects remain unfinished or unoccupied, particularly in smaller cities. Prices in major hubs like Beijing have stagnated, while resale prices are declining. In response, the Chinese government is easing mortgage requirements and increasing financial support to stabilize the market.
The real estate and construction industries in 2025 are characterized by both challenge and innovation. High interest rates and affordability concerns are dampening traditional homeownership, while technology, sustainability, and demographic shifts are creating exciting new opportunities. Stakeholders who adapt to these trends—embracing digital tools, green design, modular construction, and evolving consumer preferences—will be best positioned to thrive in the years ahead.
Key Concepts: Real estate, housing, construction, development, green buildings, sustainability, communities, mortgages, architecture, business, investing, finance, economics, globalization, marketing, aging in place
Source: Plunkett Research, Ltd., Copyright © 2025
