2025 real estate predictions from our chief economist

I know you're all weary to trust a predication after how off the “pollsters" were for this election, but ALAS, we're going to deliver some information anyway. I (Amy) had the opportunity to hear the National Association of Realtor's Chief Economist speak at a conference in Boston recently and walked away with some helpful tidbits and insights into what he thinks the Real Estate market is going to look like for 2025. 

So let's dive in:

• He said to expect several more cuts to the Fed Funds Rate, but that Mortgage Rates may not subsequently fall. As a reminder, those two rates are not directly linked. Mortgage rates are more tightly associated with what the bond market is doing and who is making money off of their money. He anticipates that rates will be in the 6's for both 2025 and 2026.
   

• One of the biggest components to if rates will drop is if the federal government is able to get the budget deficit under control. After all, the same pool of money the country is borrowing from is likely the same pool of money your mortgage is coming from.
   

• Our biggest hope for mortgage rates to drop and affordability to increase is for the production of new construction homes. With building supplies being high and permitting red tape at outrageous levels, both of those would need to be addressed from federal, state, and local governments in order for this to happen. Fingers crossed.
   

• We're hoping for more houses to come on the market. This “locked-in” effect that Sellers don't want to sell and lose their 3% interest rate can only last so long. Eventually, familial and job changes win out. In fact, it is expected that in 2025 we will see:

  • 3.5 million new babies born

  • 1.5 million marriages

  • 700,000 divorces

  • 3.5 million people turn 65

  • 2 million deaths, and

  • 25 million job switches

  • All of which are common reasons people sell their house.
     

• Lastly, he's anticipating the national median home price will increase 2% in both 2025 and 2026. Slower than in recent years, but still good, solid gains.

We hope this is helpful for you and if you would like further strategy sessions on making Real Estate moves in 2025, we'd love to talk. Feel free to reach out anytime.