As 2024 draws to a close, Jimmy Burgess and Keeping Current Matters’ David Childers look at some of the most common concerns clients are voicing right now.
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There are specific questions prospective homebuyers and potential homesellers have now that the election is over. David Childers with Keeping Current Matters is here to share answers to the most common questions agents are receiving right now.
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“Over the last few weeks we’ve had a jobs report come out, an inflation report come out, a Fed meeting and a presidential election. With so many things happening, it makes sense that we have seen increased volatility in the stock market and mortgage rates over the last few weeks.
“As things settle down, we should begin to get clarity in several areas. I would expect to continue to see volatility in the short run, but the direction we appear to be headed continues to have a consensus. The key is to be able to form a fact-based opinion for the most common questions you can expect in the coming months,” Childers said.
Will mortgage rates come down next year?
One of the most common questions agents are receiving now is: Will rates come down next year? Childers answered this question by saying, “The forecasts continue to be that rates will come down in the next year. By how much and when is the question.”
“What we’ve seen in the last few weeks is that due to the uncertainty, the bond market has risen. The Fed has now cut the Fed funds rates twice, but we haven’t seen the relief with mortgage rates that many people would like. Instead, we’ve seen rates go up.
“There are a couple of reasons for that. Inflation has always been the enemy of mortgage rates, and when inflation occurs, you can expect rates to rise. The mortgage market has reacted to the fear that the economy may heat back up under Trump’s policies, but just as we’ve seen recently, the Fed will remain mindful of inflation, and mortgage rates are projected to go down in 2025 as seen in this projection slide.”
Will prices come down in 2025?
The next common question agents are receiving is: will prices come down in 2025? Childers answered this question by saying, “The main driving force on pricing is the limited amount of inventory in most markets across the country. That issue is not going to be solved overnight or in the next twelve months.
“Because we are still facing that issue, we will continue to have upward pressure on prices in most of the country. Maybe not in Miami or Austin, Texas. There are some outliers, but in most of the markets across the U.S. the projections are to see normal and healthy price appreciation in 2025.”
He provided the following chart showing the difference in single-family units completed. He stated this shows how builders have been underbuilding over the last 10-plus years versus how many they were building in the past. This highlights one of the main reasons why inventory is such a challenge across most of the markets in the U.S.
He also provided the following chart to highlight the 2025 home price forecasts from ten forecasters they follow showing the average of the forecasts indicating an anticipated 2.5 percent home price appreciation in 2025. This highlights the consensus from forecasters that we can anticipate healthy pricing growth for 2025.
Will affordability improve in 2025?
There are several factors affecting affordability in the current market environment. Based on this, I posed the question of whether home affordability will improve and ultimately lead to more transactions in 2025?
“There are two challenges when it comes to affordability right now. The first is the existing homeowner with a low interest rate and a lot of equity. For these homeowners it is less of an affordability question and more of a ‘Why would I sell and buy now?’ challenge. That will probably change if rates come down as forecast,” Childers said.
The second challenge we discussed was for first-time homebuyers. “Affordability has been a challenge for first-time homebuyers because it is a function of three factors. These three factors are pricing, interest rates and wages (how much a buyer is making). We do have some positive momentum in these three areas. We know wages are rising. We anticipate rates will be coming down, and we know home values are rising at a more normal pace than they were.”
So, the message to first-time homebuyers looking to buy in 2025 should be: What are you doing to prepare for it now? They should be exploring all financing options and looking for financing programs in their local market designed to assist first-time buyers.
Down Payment Resource is a phenomenal resource that has aggregated all grant and down payment assistance programs available by zip code. Tools like this help agents position their buyer prospects for opportunities to buy in the coming year.
The key is to educate and assist these future buyers now by exploring the options they have for financing so when the time comes, they are ready to act based on the preliminary work already having been done.
Is this market going to crash?
The last question we discussed agents might get over the holidays and at the beginning of the year was: is this market going to crash? Childers said this regarding that question, “The key is to focus on the facts and be well versed in a couple of areas to be able to answer this question. A lot of people will say we are at an all-time high mortgage debt with over $13 trillion in mortgage debt. That is true [as seen in the chart below] but it isn’t the whole story.
You also must understand that yes, there is over $13 trillion in mortgage debt, but there is also over $35 trillion in home equity right now for a total real estate value of over $48 trillion [as seen in the slide below].”
He then shared the following chart to show the debt versus equity during the previous housing crisis versus today. Based on this information, he stated the amount of equity homeowners have in this country makes it very difficult to make a case that this market has much of a chance to crash in 2025.
The market has lacked direction and clarity for a few years now. However, we still must see how some of these concerns play out. We are moving in the direction of understanding where the real estate market is headed in the coming year and the trends appear positive.
This is the time for you to step up as the information source in your local market. Develop your opinion on the market’s direction and opportunities you see based on the best information possible. By doing so, you are setting the stage for 2025 to be your best year ever.
