Discussion on Home Prices and Sales Forecast for 2025
Velt: Do you still believe that home prices and sales will grow by 5% in 2025 as previously predicted?
Simonsen: Our forecast remains at plus-5% for the year. However, if mortgage rates do not decrease by March, we may need to reassess our forecast as home sales volume may not meet expectations. We have experienced a setback at the beginning of the year.
Velt: What is your forecast for home prices then?
Simonsen: We anticipate a 3.5% increase in home prices nationally for 2025. Despite historical trends showing a 5% annual gain, we are facing affordability challenges which are impacting our performance.
Velt: Can you elaborate on the affordability issue and its potential implications with a new administration coming in?
Simonsen: Addressing affordability requires more than just tax incentives. It is crucial to increase the supply of homes to bring down costs. The issue of affordability is complex as it is managed at a local level despite being a national crisis. Changes in control at a national level could lead to progress in this area.
Velt: There are various factors at play such as tariffs, immigration, and energy. How do you see these influencing the market?
Simonsen: The housing market has seen a 25% increase in inventory compared to last year, particularly in the Sun Belt states in the South. However, inventory remains low in the Rust Belt and Northeast regions like Chicago and upstate New York. Connecticut, for example, has significantly fewer homes on the market compared to 2019.
Simonsen: Looking ahead, our forecast initially projected mortgage rates to stay in the 6s but they have already surpassed 7%. It is unlikely for rates to drop below 5% anytime soon, with 5.5% seeming distant.