The 2025 housing market could bring a mix of hurdles to overcome along with opportunities. With interest rates potentially high and ongoing supply shortages, affordability will remain front and center.
Home borrowing costs will always be one of the key factors influencing affordability. Also, how inflation is managed will be key to understanding whether housing prices will stabilize or continue to rise. Lower inflation could usher in lower rates, with the opposite being true.
Home prices have been moving higher since 2021, and housing affordability is a major concern. In 2025, the challenge of finding affordable homes could grow even more as wages have not kept up with rising home prices in many areas. All eyes will be on the home construction sector of the housing economy in 2025.
Costs and supply chain issues (materials, labor shortages, etc.) are expected to continue into 2025 and could impact builders’ ability to construct new homes quickly. Developers may shift focus toward more affordable housing or multi-family units in response to demand from renters and first-time homebuyers. In addition, easing restrictions on housing construction may see a jump in rental properties or multi-family developments.
Some analysts anticipate a market correction in certain overheated areas given the frothy home price gains. If the economy faces challenges such as a recession or job market instability, the market could see a softening in home prices or a peak, especially in the high-cost areas. If there is some type of correction or recession, home prices could become more affordable.
Bottom line: A new year brings new hope that borrowing costs can ease and supply problems could become brighter as builders look to bring more homes onto the market.
Source: Mortgage Market Guide
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