Forecasting 2025 Real Estate
Let’s look at what other industry experts in real estate are forecasting for 2025 so we can draw conclusions from the data. Lots of agents are wondering what trends will change, and if so, by how much.
Looking Back on 2024
2024 was good, for listing agents, and not just because it was the buy side that got hammered by the lawsuits. Currently, there are 27% more listings are on the market this year compared to last year at this time. (via MLS data) Thats a whopping increase for one year. It’s particularly shocking when we consider that interest rates have stayed “high” for the last year.
Additionally, there were more sales this year than in either of the last two years. But it’s much slower. Where inventory had been the concern 3 years ago, the lack of affordability is obviously driving up DOM (days on market) in sharp contrast to the multiple offer craze we saw previously in 2021. Fewer, slower offers have caused prices to stop climbing as drastically and yet overall affordability is as terrible as it has ever been, nationally for buyers.
Today: The Housing Mason Dixon Line
The trend has been for northerners to move south and west, to warmer climates. Frequently when they retire or have another reason to move. (CC: Life events) HOWEVER, in a trend bucking move, that inflow to the South has slowed to a crawl. This has led to a lack of inventory in the north, with some markets staying at pandemic low levels. Yet there are a plethora of listings in the South.
Tale of Two Cities:
-Dallas: More homes on the market now than in last 10 yrs.
-Chicago: 60% fewer homes for sale now than normal/pre pandemic levels
Nationally, inventory is almost back to pre pandemic. Mike Simonsen recently predicted on his YouTube that it will get to “normal” in one year at the end of 2025. Normal sounds good to me. Thanks to Mike Simonsen of Altos Research (a housing wire company) for the data!
HISTORY NERD ALERT:The Mason-Dixon Line is used to describe the division of the North and South of the US, but was originally surveyed by two English surveyors who established the line in1767 to resolve a border dispute between the Penns, of Pennsylvania, and the Calverts, of Maryland. The line was established along the parallel 39°43′ N and is only 233 miles long. Mason and Dixon marked the boundary with limestone posts, called “crownstones”, every 5 miles.
In the artwork for this post I roughly drew this line over the night time satellite view of the US from NASA.
Forecasting 2025
2025 Predictions:
-Home Sales: 5% more in 2025 (Housing Wire) to 13% (NAR)
-Home Prices will rise 2.6% (Zillow) to 3.5% in 2025 (Housing Wire)
-Interest rates: 6.2% and fall to 5.9% by year’s end (Mortgage Bankers Association) or 6% (NAR)
-First Time Buyers will continue to get older. (2024 avg was 38 years old) via NAR.
-Repeat buyers that don’t require a mortgage will reach 33%. (31% last year)
– More pooling of money in 2025. Multigenerational households has surged to an all-time high of 17% (NAR)
The MBA projects that rates will start the year around 6.2% and fall to 5.9% by year’s end. Fannie Mae forecasts a dip from 5.9% to 5.6%. “We should see rates in the mid 5% range in 2025,” Shultz says. “Post COVID, 5.5% may sound high, but historically, it’s a low and economically healthy interest rate.” (MBA Nov 22, 2024)
The Hurdle
The Natl average SFR listing price is now up to $428,800. The avg credit score home owner, who has down payment cash, would need to earn $150k in the household to make this work. However, the average household income in the US is currently $80,610, a delta of $69,390. The affordability problem is very apparent for first time home owners. Solutions are needed as people with life events have pent up demand to move.
Forecasting 2025 is not easy and you can see the wide range of predictions from industry experts. Only time will tell who got it right – and who was prepared to deal with the actual outcomes in our industry. How will you make 2025 as good as possible?
