It’s not big news to announce that 2024 has not been a blockbuster year for housing. Mortgage rates topped 7% for a while back in the spring. They fell in the summer to near 6% in anticipation of lower inflation and the Federal Reserve cutting interest rates. That was promising, until the 30-year shot back up again. It’s now hovering near 6.7%.
Meanwhile, home prices keep going up. New home construction and sales have been well below pandemic levels. Sales of existing homes have been absolutely anemic.
What’s in store for 2025? Fortunately, said Nadia Evangelou, senior economist at the National Association of Realtors: “The market is gaining momentum.”
Price moderation is one promising sign, she said. This year, home prices are up about 4%. In 2025? “Two percent increase projected, a significant slowdown compared to recent years,” she said.
And buyers will benefit from more homes coming on to the market. “Inventory levels expected to improve as new construction picks up and more homeowners list their properties,” Evangelou said.
That’s based on the NAR’s prediction that mortgage rates will fall to around 6% next year. But there’s plenty of skepticism about that.
Guy Cecala at Inside Mortgage Finance said plans announced by the incoming Donald Trump administration are the main reason.
“Tariffs and mass deportations don’t bode particularly well for housing, nor the mortgage market,” he said.
Tariffs would be likely to push inflation — and interest rates — higher. Deportations could sap the labor supply for new homebuilding, pushing up costs.
Cecala thinks plenty of empty nesters will finally be ready to sell. But high mortgage rates and home prices will remain a barrier for folks trying to buy, especially for the first time.
“Home price appreciation has been off the charts for the last few years,” Cecala said. And, he added, although wage growth has been strong, it hasn’t been nearly strong enough to keep up.
