Weekly Market Update March 1st, 2025

Housing Market Update: What’s Next for Real Estate in 2025?

The real estate market is off to an interesting start in 2025. While mortgage rates have dropped, home sales are still adjusting, and the broader economy remains uncertain. So, what does this mean for buyers, sellers, and investors? Let’s break it down.

Mortgage Rates Drop Amid Stock Market Uncertainty

Concerns over tariffs and weak corporate earnings have rattled the stock market, prompting investors to shift money into bonds. This “risk-off” trend has driven bond prices up and mortgage rates down, with average 30-year mortgage rates dipping back into the 6% range.

For buyers, this is a much-needed improvement in affordability. Lower rates mean lower monthly payments, potentially bringing more buyers back into the market.

Existing Home Sales: A Mixed Picture

• In January 2025, existing home sales fell 5% month over month?but were still?2% higher than last year,?the fourth straight month of annual growth.
• The Pending Home Sales Index, which usually predicts next month’s sales, was off the mark this time. Many expected sales to remain below 4 million, but we saw a stronger-than-expected recovery.
• With mortgage rates easing, transaction volume is expected to grow 5–10% this year.

What this means: Buyers are still out there, but affordability remains challenging. Sellers may need to adjust pricing strategies as the market continues to stabilize.

Home Prices Continue to Rise—Slowly

• The Case-Shiller National Home Price Index rose 4% in 2024—a slowdown compared to recent years but still solid growth.
• New York City (+7.3%), Chicago (+6.6%), and Boston are the fastest-growing markets.
• Tampa saw the slowest growth, but only after years of skyrocketing prices.
• Over the past five years, home prices have surged 53%, making the recent cooling phase expected and sustainable.

For homeowners, this means equity continues to grow. Even a 4% appreciation on a $400,000 home equals a $16,000 gain—a strong return in a more balanced market.

Where Are Prices Still Below Their Peaks?

While most markets have recovered, some still haven’t reached their 2022 highs:

• San Francisco (-5.8%)
• Phoenix (-1.2%)
• Denver (-1.0%)
• Seattle (-0.7%)
• Dallas (-0.6%)
• Portland (-0.3%)

These cities saw sharp price declines in late 2022 and are still playing catch-up. However, their long-term appreciation remains strong, with San Francisco up 33% and Phoenix up 67% over the past five years.

Homes Are Taking Longer to Sell

• The median Days on Market (DOM) rose to 41 days in January 2025, up from 36 days a year ago.
• Pre-pandemic, the average was 35 days, so the market is gradually returning to normal.

Sellers should prepare for a longer selling timeline and price strategically, while buyers may have more room to negotiate.

Mortgage Market & The Fed’s Next Move

• The 10-year Treasury yield fell from 4.64% to 4.24%, helping push mortgage rates below 7%.
• The market is betting on a Fed rate cut by mid-year, which could further lower borrowing costs.

Why this matters: If the Fed cuts rates, mortgage rates could dip even further, improving affordability and stimulating more home sales.

The Bigger Picture: The Economy Remains Uncertain

New Treasury Secretary Scott Bessent recently warned that the job market is heavily dependent on government and healthcare jobs, making the broader economy more fragile than it appears. His focus? Bringing down long-term Treasury yields to stabilize growth.

What This Means for You

• Buyers: Lower mortgage rates make this a better time to purchase than late 2024. However, be prepared for slower price growth and more negotiation power.
• Sellers: Homes are taking longer to sell, so pricing competitively and staging effectively are key.
• Investors: The market is normalizing, which means fewer extreme price swings but steady long-term appreciation.

Final Thoughts

While the real estate market is no longer in the hyperactive phase we saw during COVID, it remains resilient. Mortgage rates are decreasing, price growth is steady, and sales are stabilizing.

The key takeaway is that?real estate remains a substantial long-term investment, and understanding market trends can help you make smarter decisions.

Are you looking to buy, sell, or invest in 2025? Let's do it together.

#RealEstate #HousingMarket #MortgageRates #HomeBuying #Investing