BY ANDREA BELL & BETH ANDERSON
What can we expect in 2025? According to NAR Chief Economist Lawrence Yun, we might finally be turning a corner after a challenging period marked by high borrowing costs and low inventory. Many experts are projecting a notable increase in home sales, with estimates showing a 9% increase for 2025 and an impressive 13% increase for 2026. This optimistic forecast is largely attributed to stabilizing mortgage rates, which are expected to hover around 6%. What can homebuyers and sellers expect from the housing market in 2025? There are several factors that will shape the housing market. We will focus on the Federal Reserve in this article and take a closer look at FISCAL POLICY. Based on the comments of Bill Bodner, Chief Analyst of Mortgage Market Guide, the nomination of Scott Bessent to be Treasury Secretary, may be the most impactful decision for rates and housing we will see this year. The day after the announcement, the bond market rallied on the news and continued to do so for the next several weeks. We saw a 150-basis points increase which translated to a 25% decrease in mortgage interest rates. The reason for this dramatic change is that Bessent is seen as someone with a cooler head that will prevail during the much-talked-about discussions and negotiations around tariffs. His temperament resists the broad-based, one-size-fits-all approach and leans in on the more strategic use of tariffs. He is also known for his 3/3/3 Program. This is thought to bring stability across markets by lowering our national deficit down to 3%. Yes, that is a BIG audacious goal, and the plan is to achieve that by 2028.
We need to be able to rewrite that debt and save revenue, as individuals and as a nation. Next is increased economic growth of 3% annually. Industry, jobs, housing all moving along at a measured pace. The last one is the domestic increase in crude oil production of 3 million barrels of oil a day.
The last three years of conversations have been focused on Jerome Powell and the Federal Reserve. Remember, the Federal Reserve only has short-term interest rates to work with to provide price stability and maximize employment. Hopefully, with Scott Bessent at the helm, as Treasury Secretary, we will see an increase in oil production, a major decrease in our deficit spending and consistent economic growth. This will bode well for stability to declining long term interest rates, potentially more Fed Funds rate cuts, more new construction starts and existing home sales and a more stabilized market than we have seen since 2019.
So, what does that mean for you? If you are a potential buyer and have been waiting on the “sidelines,” 2025 might be your year to buy! There was a common theme in 2024, and a majority of buyers felt they would be able to perfectly time their home purchase with a drop-in rate at the cross section of lower home prices. Everyone wants this scenario, but few will realize it. The reality is that you will need to act quickly to avoid the increased demand which brings increased housing prices. Reach out to a licensed lender to start the pre-qualification process now, so you are prepared in the event the rates drop, and you find the perfect property. Statistically, there are 4-5 million hungry buyers on the sidelines waiting to see a decrease of 1% in mortgage rates to qualify. Given the swift uptick in rates in the first quarter of 2022, more than 10 million home buyers were priced out because of the increase in interest rates, which made them unable to qualify for the properties they had been “bookmarking” in their online searches just the month before. There will be competition! If you are a seller, the possibility of increased inventory most likely means more competition. You should focus on what improvements you could make and what will be the “best bang for your buck.” Contact a licensed Realtor for recommendations on what improvements potential buyers are looking for. Make sure your Realtor can educate you on the benefits of professional staging and photography and that he or she has proven marketing strategies to get you “top dollar.” Lastly, consider the timing of your property sale to coincide with the predicted economic upturn.
Real estate decisions should be made based on your individual circumstances and local market conditions. Stay informed and consider consulting with a local real estate professional to make the best choices for your situation and a lender to discuss options that can make you a cash buyer, options to access the equity in your current home and not have to make a contingent offer! We are excited and optimistic about what 2025 will bring to the greater metro Denver real estate market.
Test your real estate and lending knowledge with this short quiz and see if you can ACE it. Very few do. Will you? www.firsthomeiq.com/beth-anderson
We wish you a Happy New Year filled with much happiness and prosperity.
Andrea Bell has been selling real estate and helping buyers and sellers for over 23 years. She and her family have lived in Wash Park for over 20 years and love everything about this amazing community. Providing outstanding customer service through honest hard work is the cornerstone of her business. Andrea can be reached at 303-748-7299.
Beth Anderson is a licensed Loan Officer with Universal Lending. Beth has been educating buyers on their mortgage options for over 33 years. In that time, she has successfully helped over 3,000 clients to get to the closing table. Beth can be reached at 303-550-5924.