Housing Outlook: Things Are Looking Up

Homeowners’ net equity surged to $35 trillion in 2024, with nearly a third of that growth occurring in the past four years.
Consumer satisfaction with real estate agents remains high, with nearly 90% recommending their agent or broker.
Despite DIY and alternative brokerage models, most consumers prefer working with real estate professionals.

2023-2024 saw the slowest home sales in 30 years, coupled with record-low housing affordability.
However, home sales are rebounding, with increased inventory and rising incomes outpacing home price growth.
The Federal Reserve has started cutting interest rates, but mortgage rates have yet to decline significantly.

Past Presidential Term Housing Sales:
- Trump (first term): 21.8M existing homes, 2.7M new homes sold.
- Biden: 19.3M existing homes, 2.8M new homes sold.
Mortgage rates of 7%-8% are expected to decline in 2025 as inflation stabilizes.
Rent inflation is overstated in government data, but private sector reports show no significant rent increases in 2024.
The national debt has surged from $20T (2017) to $36T, keeping mortgage rates in the 6%-7% range.
If government spending is significantly reduced, mortgage rates could drop to mid-5%.

Privatization of Fannie Mae & Freddie Mac is unlikely, as they provide stability and lower interest rates.
FHA and VA loan programs will become more accessible as more housing inventory becomes available.
Job growth and GDP expansion (near 3%) are fueling housing demand.

Strong economic growth benefits commercial real estate, increasing demand for retail, warehouse, and apartment spaces.
Office space remains underutilized, with rising vacancies and increasing subleasing activity.
Commercial loans face refinancing challenges, with $2T in loans coming due at higher rates over the next 2-3 years.
Commercial property values remain below pre-pandemic levels, requiring cash infusions for refinancing.

Retail and industrial rents will rise due to supply constraints and continued online shopping growth.
Apartment rents will increase from 2026 onward as vacant units get absorbed.
Office rents will remain under pressure, requiring concessions to attract tenants.

Residential real estate is poised for recovery, with lower mortgage rates and rising inventory.
Commercial real estate faces refinancing challenges, but strong economic conditions will support retail, industrial, and multifamily sectors.
Government spending and Federal Reserve actions will influence mortgage rates and investment strategiesin the coming years.