THIS will Happen to the US Housing Market in 2025

Welcome back. Thank you so much for joining me in today's video. Fannie Mae actually just announced their latest housing market forecast. They actually revised downward their forecast for home sales in 2024 and 2025, citing the rise in mortgage rates and inventory levels. In today's video, I'll share the latest housing market forecast through 2025 for housing starts, home prices, home sales, and much, much more. Let's go ahead and begin today's video. I have a lot to share. And again, thank you very much for joining me in today's video. It says existing home sales fell back 4.3% in March to an annualized pace of 4.19 million. That's the annualized sales pace according to NAR for the month of March. But if you missed my previous video posted yesterday, I shared how they noted that in April home sales fell further. So in April, they fell by 1.9% compared to March and also coincidentally down by the same amount from one year ago. So home sales at very low levels. And right now for the first four months this year, we're more or less on track to the lowest levels in sales going back to 1995. In other words, at the current sales pace, we would have fewer existing home sales in 2024 compared to 2023. Even though last year we had the lowest levels in sales going back to 1995. Absolutely insane. Anyways, according to Fannie Mae, while we expect home sales to remain sluggish going forward, the flow of new listings, in other words, people listing their house for sale, new listings has remained steady in recent months, despite generally rising rates. So again, there's a lot of talk about how the increase in rates was going to cause a lot of people who have 2%, maybe not 2%, 2.5% to 5% rates. And those people are not going to sell their houses due to the fact they don't want to take on a much higher rate because average rates today are around 7%. What we're seeing this year though, is that some people or some homeowners are getting off the sidelines and deciding to list their houses for sale, despite the increase in rates. So in any case, according to Fannie Mae, this is suggesting that additional sizable sales decreases are unlikely. I will say that again, last year we had 28 year lows in sales. So we can't have a sizable decrease in sales from multi-decade lows already. We are at very low levels right now. So it's very hard to see a scenario in which sales were to decrease significantly from last year. Anyway, just want to provide that context because yeah, I agree with them. We're not going to see a sizable decrease given the fact that sales were so low last year. So according to them, enough would-be sellers or homeowners are deciding they can no longer put off moving or selling their houses. In April, the supply of active listings or housing inventory, according to realtor.com, was up by 30.4% year over year. I will add that I make videos about this on a weekly basis as well from realtor.com. We are not only seeing a rise of inventory due to new listings, but also due to a decrease in home sales as well. So this is really due to the fact that we're seeing home buying demand falling, but also new listings increasing as well, which is all causing inventory to rise above last year's levels. They also talk about new home construction as well. So it says single-family housing starts fell in March by 8.7%, followed by a 0.4% decline in April. So we're talking about the month-to-month changes. So here is the U.S. Census Bureau. This was announced a few days ago. So here's housing starts for single-family houses nationwide. These rates are seasonally adjusted and also annualized as well. So it's down by 0.4% from March, this April, but up by 17.7% from April of 2023. So more or less flat from the previous month, but up by about 18% from 12 months ago. We did see big gains in Midwest up by 41%, the South up by 17%, the West increased by 18.4%. This, by the way, are housing starts, which is a beginning phase in the construction of building a brand new single-family house. In contrast, in the Northeast, that was the only major region that posted a decrease year over year down by 9.5%. By the way, Fannie Mae is predicting that housing starts of single-family houses will increase this year compared to last year, but also increase in 2025 as well, which is pretty remarkable as well, because we have a relatively high level of single-family houses under construction right now. The most recent stats we have is for the month of April, again, posted about five days ago from the U.S. Census Bureau. So according to them, the seasonally adjusted annualized rate of single-family houses under construction is at 682,000. This is coming down from the peak that was set back in May and June of 2022, where at that time there was 829. So housing starts have been coming down more or less ever since then, but when looking at pre-COVID levels at 682,000 for the month of April, this is actually the highest levels going back to August of 2007. This is night and day difference compared to apartment buildings under construction. It has been coming down from the peak that was set back in more or less August of 2023. Right now we're at 919,000, again, seasonally adjusted and analyzed, but this is very close to all-time record highs, not too far off the peak that was set about one year ago. Also looking at pre-COVID levels, at 919,000, this is higher than any other month going back to at least the early 1970s. And this is one of the reasons why Fannie Mae believes that housing starts of multifamily units will be coming down through 2025, whereas housing starts of single family houses actually going up based on the latest forecast. In regards to the real estate market predictions for existing home sales, excluding brand new houses, existing home sales fell to a seasonally adjusted rate of 4.19 million units in March. Again, it came down to about 4.14 million in April. We have revised modestly downward our forecast through 2025 for home sales, mostly driven by the change in mortgage rate expectations. I'll share that here with you guys a little bit. They believe that rates will be much higher than what was previously expected. And I'll share their forecast that was set back in January this year as well to share the differences there because there's some very big ones. In regards to their predictions for new home sales through 2025, they have lowered their expectations primarily due to their higher interest rate outlook, which to me makes sense. We're going to see a fewer amount of home sales due to the fact that we have this giant housing affordability issue nationwide. It says here, right here, higher rate environment projected to damper or dampen housing activity through 2024. Housing activity is expected to slow modestly compared to the previous projections. In other words, a downward revision in their previous forecast. If the broad upward movement in mortgage rates since the start of the year is sustained. Now here's a look at rates ever since the start of the year, which is right about there. We started the year, this by the way is according to Friday Mac, looking at weekly average third year fixed rates for people with great credit. So the start of the year, we're at 6.62%. Rates have been more or less coming up ever since then. And they peaked at 7.22% for the week ended May 2nd. They have been coming down ever since then. We're still sitting above 7% on average right now. And that by the way, is quite a bit higher compared to a year ago, when at that time we were at 6.4%. Going back to Fannie Mae's article here, it says, however, their group, which is their economic and strategic research group by Fannie Mae, notes upward risk to its latest forecast for housing starts, single family mortgage originations and home sales activity, particularly if upcoming data releases lead market participants to believe that the Fed is closer to easing monetary policy, which would likely push rates downward. So we're basically saying here, if the Fed pivots sooner than expected, in other words, decreases the federal funds rate, that could likely cause mortgage rates to fall, which will likely increase mortgage originations, housing starts, and home sales. But based on everything I'm reading so far, there is a very low likelihood that the Fed will start cutting rates anytime soon because inflation is still remaining very much sticky or elevated to say the least. Going back to Fannie Mae's real estate market predictions, according to Doug Duncan, who's Fannie Mae's senior vice president and chief economist, he say the following. The question our economist team is asked most frequently remains where we think mortgage rates are headed. For now, we see rates remaining closer to 7% through the end of the year before trending downward in 2025. I remember when people were talking about in late last year, people were talking about we're going to see rates in the fives by mid-year. And here we are in late May, we still have average rates closer to 7% than 6%. So a higher for longer interest rate environment right now. It says our economy or a consumer survey suggests that households who are paying attention to the housing market continue to take a wait and see approach. This is consistent with our latest housing forecast, which does not foresee a dramatic change in activity until affordability improves. I also believe that as well. We can't have home sales absolutely skyrocket if we have this environment in which we have multi-decky lows for housing affordability due to the rapid rise in rates and home prices over the past several years. But please leave a comment below your thoughts regarding that. All right, let's change gears slightly here and talk about the forecast for housing starts, home sales, rates and home prices through 2025. Here's a kind of a snapshot of that. This is just posted, I think it was yesterday. So single family housing starts decreased by 5.7% in 2023 compared to 2022. The forecast for 2024 is an increase of 9.5% compared to 2023 and then to increase further in 2025 up by 2.4%. In contrast, look at multi-family housing starts. These are two units or more. The vast majority of these would be apartment buildings in order to rent out. They fell by a whopping 13.7% in 2023. The forecast is calling for a by 28.8% from last year, then to only increase by 2.8% in 2025. As a note right here, multi-family starts should fall from the relatively high number of multi-family units under construction, as I shared with you guys, and also due to slowing rent growth as well. All right, moving on, there are forecasts for new single-family houses as well as existing houses. So brand new houses is forecasted to increase by 3.2% next year, or this year I should say, and then for existing to increase by 2.7%. Quite a bit different compared to what happened last year. So last year, new houses increased by 3.9%, whereas existing houses tanked by 19%. But this year, more or less in line with new versus existing. Then in 2025, to rise by 10% for new houses and up by 8.1% for existing homes. So for example, for existing houses, they're calling for $4,198,000 this year and just over $4.5 million in 2025. So here's something I put together for you guys. This is based on data from the National Association of Realtors, and I'm looking at the total number of existing home sales each and every year going back to 1989. So their forecast from Fannie Mae this year, just under 4.2 million home sales. That'd be a small increase up by 3% from last year's levels. Again, last year, we had about 4.1 million. That was the lowest number of or the fewest number of home sales since 1995. In other words, a 28-year low, which is absolutely crazy because just two years before that, 2021, it was a 15-year high. So in two years, we went from a 15-year high down to a 28-year low. In any case, that's down by 21% from 2019 and 2018. The forecast for 2025, just over 4.5 million existing home sales. That'd be up 8% from 2024, but still down by 15% compared to pre-COVID levels. These figures, by the way, are well below the average. So for example, the median number per year since 1989, based on my formula right there, is just over 5 million, but this year, 4.2 million. So about 800,000 less compared to the long run average. Also next year, 4.5 million, approximately 500,000 less than historical norms as well. Also the forecast this year at approximately 4.2 million was actually revised downward because their previous forecast was calling for 4.27 million this year. Also besides last year, this would be the fewest number of home sales since 2010. In other words, a very low level of home sales this year, if we actually get to this number. Also, this is only 3% more than last year's levels. Again, last year, we were at a 28-year low. Also looking at their forecast next year, that was also a downward vision as well. One month ago, their forecast for 2025, 4.7 million sales. Now it's just over 4.5 million. That would be a three-year high, but again, approximately 500,000 less than the long run average. Also just for fun, I added Zillow's forecast as well. So Zillow called for just over 4 million sales, existing home sales this year, which is approximately 148,000 less than Fannie Mae's predictions. All right, changing gears slightly here, let's talk about their forecast for home prices based on their HPI or their home price index and their predictions for mortgage rates as well. So home prices for Q1 of 2024 is going to peak at 7.4%. That's a gain in prices, again, based on their HPI compared to Q1 of 2023. Thereafter, we're going to see positive growth, but the growth rate to slow down. So for example, by the time we hit Q4 of 2025, a small gain of 1.5% compared to Q4 of 2024. Last year, we saw a growth rate at 6.6%. 2024, their predictions up by 4.8%. Then 2025, well below the long run average, home prices tend to increase around 3 to 5%, but they believe that next year, a small gain of 1.5%. This, by the way, is much more bullish compared to January's predictions, despite Fannie Mae's forecast for higher interest rates. Now here's a look at their forecast that was posted in January. Look at their HPI, 2024 up by 3.2%. Now in May, up by 4.8% and up by 1.5% in 2025, whereas back in January, a small gain of 0.3% next year. This is quite unusual because they believe that rates will actually be higher than was previously forecasted. Again, back in January, 2024, the average 30-year fix, 6.1%. Now 7%. Back in January for next year at 5.6%. Now they're forecasting 6.7%. So basically forecasting for a percentage point higher compared to the previous forecast that was back in January this year. But despite that upper revision in rates, they are predicting that home prices will increase faster than was previously forecasted back in January this year. So I would love to hear from you guys. What do you guys think about their real estate market predictions through 2025? Do you believe that home prices will decrease? Fannie Mae believes that home prices will increase through 2025. But yeah, I'd love to hear from you guys. Please leave me a comment below. Also, if you guys got any value out of today's video, then please hit the like button. Also, consider subscribing as well. Hope you guys have an awesome day. I look forward to seeing you on the next video.