At the end of 2023, the U.S. economy was teetering on a recession. Consequently, this past year presented an uncertain landscape for the real estate markets, with inflation unchecked and mortgage rates in untenable territory.
While much of the uncertainty diminished throughout 2024, the real estate market did not fare as well as might be hoped, and the industry faces the recurring challenges of low inventory and stubbornly high interest rates heading into the new year.
However, there is light at the end of the tunnel, and there are many economists who are giving us hope for a stronger year ahead.
While you may not be concerned about the world economy as you set out a business plan for your corner of the world for 2025, U.S. real estate is impacted by what happens elsewhere, from supply chains to foreign investors, so it will, in fact, have an impact.
The International Monetary Fund in its recently released global outlook reported that the global battle against inflation has been won and moderate growth is anticipated.
“After peaking at 9.4 percent year-on-year in the third quarter of 2022, we now project headline inflation will fall to 3.5 percent by the end of next year, slightly below the average during the two decades before the pandemic,” IMF noted. “In most countries, inflation is now hovering close to central bank targets, paving the way for monetary easing across major central banks.”
The organization also found the global economy to be “unusually resilient throughout the disinflationary process,” with growth projected to hold steady at 3.2% in the coming year.
The U.S. economy performed much better than expected in 2024, as the country fended off a recession and got inflation under control. David Mericle, chief US economist in Goldman Sachs Research said he believes the country is on course to grow GDP by 2.5% in 2025.
“Consumer spending should remain the core pillar of strong growth, supported both by rising real income driven by a solid labor market and by an extra boost from wealth effects,” Mericle wrote in his November Outlook report. “And business investment should pick back up even as the factory-building boom fades.”
All of this should be good news for real estate, but while the economy is on track, Fannie Mae and Freddie Mac are less optimistic about the real estate market.
Fannie Mae and earlier forecasted an 11% jump in home sales in 2025, but have dialed that back to 4%, due to their belief that mortgage rates will not drop below 6% throughout the year. The GSE is more hopeful about 2026, suggesting a 17% jump in activity as interest rates finally decrease and pent-up demand fires up the market.
Freddie Mac matched Fannie Mae’s more subdued prediction, although it was upbeat about refinance business.
“For 2025, we expect the decline in rates to boost refinance origination volumes,” the company said in its November Economic, Housing and Mortgage Market Outlook. “This, coupled with expected increase in purchase originations due to a modest growth in home sales and home prices, should improve the mortgage market in 2025. We forecast total origination volumes to increase modestly in 2025.”
Freddie Mac highlighted in its report that the housing shortage is weighing on the real estate market, noting that they estimated the housing shortage will stay stubbornly in the 3.7 million range.
Anyone who has been in this business for any length of time knows that the situation could change for a whole host of reasons. The wisdom is to create a business plan for known factors and revisit it throughout the year as the market evolves.
Florida Agency Network (FAN) is a conglomerate of independent title agencies that share back-office services, pooled resources, access to industry-leading technology, improved efficiencies, and the ability to offer their clients greater geographic coverage throughout Florida. Closing Suite leverages those resources to support title agencies achieve strategic growth and more efficient operations, as well as providing strategic consulting services on crucial topics such as growing geographic footprint by building affiliated arrangements and other partnerships. Contact us to learn more about how our strategic alliances can help you expand your business opportunities in the coming year.
Please fill out form below