VOL 2024 ISSUE 12
www . elpasobuilders . com
VOL 2024 ISSUE 12
BUILDERSOUTLOOK
PUBLISHED BY THE EL PASO ASSOCIATION OF BUILDERS : NATIONAL , STATE AND LOCAL HOME BUILDING INDUSTRY NEWS
Uncertainty in 2025 clouds housing market forecasts
Federal policy changes could impact real estate in surprising ways , but economists are predicting fairly modest shifts in the new year .
Forecast season has arrived , but for housing market economists , 2025 may be one of the more challenging years to predict .
One reason ? It ' s a transitional year for the country . A new presidential administration will be sworn in next month , and many expect an economic shakeup . During his campaign , Donald Trump made a number of declarations about tariffs , immigration , tax cuts and construction regulations ; while it ' s too soon to know how ( or if ) these proposals will translate to policy , economists generally agree they could lead to a risk of higher inflation , deterring future rate cuts and keeping mortgage rates elevated .
" There will be competing pressures in 2025 , creating a tug-of-war that could impact the housing market in surprising ways ," said Lisa Sturtevant , Bright MLS Chief Economist . While pent-up supply and demand are waiting to be " unleashed ," they may be constrained by " economic uncertainty and political unpredictability ," Sturtevant noted . Despite that uncertainty , economists from Zillow , Redfin , Realtor . com and Bright MLS are placing their bets on how the real estate market will fare in the coming year . Home sales will get back above 4 million
The annualized rate of existing home sales has remained under 4 million since June — far below the 6 + million rate seen in 2020 and 2021 . But there seems to be a consensus among economists that sales will improve in 2025 , though opinions differ on how much :
Existing home sales will rise 7.5 % to 4.4 million for the year ( Bright MLS ).
A modest 1.5 % increase will push sales just over the threshold to 4.07 million ( Realtor . com ).
Sales will rebound slightly , ending the year at around 4.3 million ( Zillow ).
Hedging their bets , Redfin economists put the number between 4.1 and 4.4 million . " We ' re presenting an unusually wide sales range this year because while high housing costs may price out some would-be buyers , there ' s a fair amount of pent-up demand in the market ," they said in their forecast .
What about new homes ? If regulations ease , builders may increase production ; fresh inventory could accelerate sales , particularly since builders have greater flexibility around financing and other incentives .
Price growth will slow If new home construction does surge , that will mean more overall inventory in some markets , potentially cooling off prices . Economists are still predicting year-over-year growth , but it may vary widely by market and the pace is expected to be slower than in recent years . Here are their forecasts :
• Home prices will rise 3.1 % in 2025 . While some economic upheaval is expected , no major risks have emerged that would cause prices to fall ( Bright MLS ).
• Prices will end the year 3.7 % higher , continuing the growth trend that started in 2012 ( Realtor . com ).
• Price growth will continue at a clip similar to the second half of 2024 , increasing 4 % ( Redfin ).
• Home values will increase 2.6 %, a much slower rate than previous years ( Zillow ).
Mortgage rates will stay above 6 %
Rates have defied expectations for the past few years . Predictions for 2023 were wildly off , and several 2024 forecasts put mortgage rates in the 6-6.5 % range by yearend . That would require a big drop in the next few weeks , as rates have been stuck at around 6.8 %.
While the Federal Reserve is still expected to make multiple rate cuts in 2025 , that could change if inflation rises in response to Trump policies , as economists have suggested .
Either way , mortgage rates are not expected to plummet next year :
• Mortgage rates will average about 6.4 %, dropping to 6.25 % by the end of 2025 ( Bright MLS ).
• Rates will hover around 6.3 % most of the year , ticking downward in the fourth quarter ( Realtor . com ).
• Rates will remain around 7 %, hampering affordability for many ( Redfin ). Zillow didn ' t commit to any particular percentage , but said to expect more ups and downs throughout the year , noting that mortgage rates rarely followed the expected path in 2024 . Commissions , consolidation and a shifting market Beyond the numbers , economists weighed in on other aspects of the market and industry . Agent commission rates will fall in 2025 , predicts Redfin , particularly for luxury homes and in competitive markets .
At an industry level , consolidation will increase , Redfin economists said , because the Federal Trade Commission under the new administration is expected to be more willing to approve deals among larger companies .
More balance will return to the market , at least in some areas , said Danielle Hale , Realtor . com chief economist . Where inventory is more limited , " sellers still have the upper hand in terms of negotiating prices ," but where affordability is an issue , that could mean " longer selling times or price reductions in some markets ," Hale said .
Zillow highlighted the Southeast as a market that now favors buyers , and expects that trend to spread to the Southwest . But all bets are off if mortgage rates fall sharply , said Chief Economist Skylar Olsen , because demand could again outstrip supply and increase competition among buyers . Learn more from our source : www . realestatenews . com