Housing Market Could Change FOREVER (2025 Expert Forecast)

Hey, it's Joe. I just got off the phone with a client who's panicking about buying a home in 2025. Sound familiar? If you're worried about the housing market, you're not alone. In this video, I break down HousingWire's 2025 forecast. The report just released contains significant news. It predicts a 5% increase in home sales nationwide. I explain what this means for both buyers and sellers. I examine inventory levels, interest rates, and how these factors might influence your plans. Finally, at the end of the video, I add my perspective using data with a further reach in history to help you understand where the housing market is going in 2025 and beyond. These insights are essential whether you are considering a move or seeking to understand the market. Picture this. You're scrolling through real estate listings for the first time in a month and it feels like deja vu. Same houses, same prices. We're facing a big inventory squeeze in the housing market, primarily because of the mortgage lock-in effect. Here's what's happening. 75% of people with mortgages in the U.S. have interest rates below 5%. That's great for them, but it's causing a problem. These homeowners don't want to sell because they'd lose their low-rate mortgages. This means fewer homes are coming on the market, which keeps prices high. But there's some good news. HousingWire thinks we'll see 13% more homes for sale in 2025. They predict we'll have about 800,000 single-family homes on the market by October. That's better, but still way less than usual. Even with this growth, we're still way below normal levels. To put it into perspective, back in 2008, we had over 4 million homes actively listed. So, while 800,000 is an improvement, it's just a fraction of what we've seen in the past. Don't get too excited, though. This shift won't happen the same way Some areas might see more homes for sale sooner than others. It's all about how supply and demand work locally in real estate. So, what does this mean? The housing shortage is real, and it won't fix itself overnight. Even with more homes coming on the market, there still won't be enough. If you're buying, you need to be ready to move fast when you find something you want. If you're selling, you're in a good spot, but you might start to see more competition as more homes become available. And after your sale, it will be tough finding your next home. If you've been following me for a while, you know my experience has taught me that informed consumers save money and are happier during their move. That's why I deliver market reports from numerous sources, scrutinizing the U.S. housing market from all angles. Today's report from Housing Wire is just one source's view of the current housing market. If you're not a subscriber, please click the thumbs up like button and subscribe now to get all my new content when it is fresh. If you really want to know what's going on in housing, to see and hear the data explained, to learn the tips and tricks that put extra money in your pocket, then subscribe now and I'll keep you in the know. Let's talk about why home prices aren't dropping as much as you might expect, even with fewer buyers out there. There's this thing called downside stickiness in home prices. It means home prices are tough to bring down. And here's a mind-blowing stat for you. Home prices have only declined in seven of the last 80 years and two of those were by less than one percent. That's right, just seven times in eight decades. Nevertheless, we have people calling for a housing market crash all the time. There's this thing called inflation. You might have heard of it. Well, it impacts home prices just like it does all other products you use. So why do prices stay high even when demand drops? It's a mix of things. The economy is still growing, more people want to buy homes, and the government has policies that support home ownership. All this together keeps home prices pretty steady. Now, Housing Wire's crystal ball is showing a three and a half percent appreciation for 2025. While this may seem modest, it is slightly lower than the historical average. Additionally, some experts anticipate even higher gains, indicating varied forecasts within the industry. Housing price trends vary by region. In parts of the Sunbelt where demand was previously high, unsold homes are accumulating, exerting downward pressure on prices. Meanwhile, northern cities experience rising prices due to limited inventory. What maintains high home prices despite lower demand? A combination of sustained economic growth, a growing population of potential buyers, and government policies that support home ownership creates resilient home prices. One last thing to remember, more houses for sale does not always mean lower prices. Unless we're talking about millions of new homes being built, each new listing usually means another buyer entering the market, too. It's not as simple as more houses equals lower prices. So, that's the real reason home prices stay high, even though the market's cooled off. It's complicated, but I hope this helps you understand what's happening out there. Home sales in 2024 hit a low of about 4 million units, the lowest since the 2008 housing crash. For 2025, experts have different ideas. Housing Wire thinks we'll see a small 5% bump to 4.2 million sales. The National Association of Realtors is more upbeat, saying we might hit 4.9 million. But consider the source. The Mortgage Bankers Association and Goldman Sachs are guessing around 4.2 to 4.3 million. Fannie Mae says 4.5 million existing home sales. These numbers are still lower than we've seen in the past 20 years, averaging about 5.15 million sales a year. What's driving these predictions? Mortgage rates. When rates go up, fewer people want to buy. We saw this happen when rates hit 7.5%, and suddenly, way fewer people were applying for mortgages. Housing Wire thinks if mortgage rates drop to about 6% in 2025, we might see home sales increase and maybe even go over 4.2 million. Fannie Mae's more positive guess of 4.5 million sales assumes rates will stay under 6% for most of the year. The housing market is likely to recover slowly. Experts disagree on how fast we'll get back to where we were before the pandemic, but everybody agrees that mortgage rates will be super important in shaping the market in 2025. Housing Wire predicts mortgage rates will be between 5.75% and 7.25% in 2025. Rates below 7% might sound good compared to now, but here's the catch. Even with this change, many buyers still can't afford to buy. Let's talk about affordability. In the last three years, mortgage payments have gone up by 80%. That's a huge jump in monthly costs, so even if rates drop a bit, we're still looking at a market where many people are priced out. The Federal Reserve started cutting rates in late 2024, focusing more on jobs than inflation. If the economy struggles, they might keep rates lower to keep things running smoothly. Here's a stat that shows how much rates matter. For every 1% increase in mortgage rates, about 5 million potential buyers can't afford to buy anymore. That's how sensitive the housing market is to these changes, but lower rates won't fix everything. We still have that inventory shortage, remember? Even if rates drop, there's a lot of pent-up demand for homes, and that could keep prices high. So, will buyers get a break in 2025? It's not that simple. For rates to really drop, we'd need to see a weaker economy, better spreads between treasury and mortgage rates, or the Fed being even more generous with their policy. HousingWire believes that if mortgage rates stay above 6.5% for a big part of 2025, we might see even fewer home sales. That's tough news, especially for first-time buyers already having difficulty getting into the market. The bottom line? We might see rates improve slightly, but don't expect them to get super low anytime soon. Buyers must stay alert, watch for when rates dip, and be ready to move fast. The 2025 housing market looks formidable, with low inventory, sticky prices, and high interest rates. This situation is challenging for both buyers and sellers. As promised at the start of this video, I said I would conclude with my own perspective gained from a long study of the history of the U.S. housing market. There are three interesting facts about today's market that one must consider. 1. Home affordability is terrible, but it was worse in the 1970s and early 1980s when inflation ran amok. There was no crash that brought home prices down, it was time that cured the market. 2. Mortgage rates are more than double what we saw a few years back, but rates today are 13% lower than the 50-year average. People waiting for lower rates will soon realize that today's rates are lower. 3. We have a significant shortage of homes in the U.S., so we shouldn't expect home prices to do anything but rise at the national level. When we put these three factors together, I believe it reveals a slow housing market recovery that spans four or more years, where prices remain high, rates remain below normal, and people move at a slower rate than what we've seen in recent years. Remember, real estate is local. Validate this guidance against your local economy, housing supply, and demand. Some areas experience growth while others face depopulation, so no one-size-fits-all approach exists for determining your housing needs. To further your insight into what you can expect in the new year, check out my new video revealing Zillow's home sales outlook for the 2025 housing market. It includes elements that HousingWire did not include.