We’re glad to be back with another Real Estate post today! A lot has happened recently, and we’re going to break down what we see as some core issues affecting the housing market in 2025: Rising Home Prices.
If you’ve missed any of our previous posts where we discuss the buying process, what to look for, how to find an agent, {and so much more}, be sure to check our entire series out here as you start your real estate journey. If you’re in the market now or will be in the future, we want to provide you with valuable information for navigating the real estate market so we can help you make that next purchase as I’m a licensed Realtor.
But first, let’s keep all the legal guys and gals happy. The purpose of this series is to explore the housing market and what I believe we can expect from it. Please understand we’re not offering personal financial advice. We highly encourage you to talk to your local Realtor and licensed financial adviser. {Side note: If you need help finding a good local Realtor, let us know no matter where you live. We’ve helped several people with this not-so-little task!}
As we examine the market and what we think it will look like in 2025, I want to point out a couple of things that we should all agree on:
First, this is not a political post; I don’t care who you support {unless it is the University of Alabama, then those are fightin’ words.}
Seriously, though, we are not here to discuss our core values or beliefs on policy or the people implementing it; we are here to examine policy, events, and data and how they affect the market. Our beliefs and values do not matter in this discussion of data.
Ok, now that we’ve dealt with 1. the lawyers and 2. our emotions + personal beliefs, let’s look at some things I see impacting the housing market in 2025.
1. Interest rates
This is the one that’s on the top of everyone’s mind. Rates at the time of this writing are hovering over 7%, with an FOMC meeting on January 28/29. It is widely believed that the FED will hold rates steady and only project two .25 basis point cuts this year. That’s a far cry from what we all were hoping for, but with inflation being sticky and rising a little, it’s not a surprise.
There is some speculation that mortgage rates will slightly climb in the short term as the FED will hold rates until later this year.
President Trump has declared that he will force the Central Bank to lower rates. While this sounds great, and I truly wish he had that power, the reality is that the Central Bank is separate from the executive branch, and he has zero control over them; he can’t even fire the FED Chairman.
So the best we can hope for is that he enacts some economic policies that, in a roundabout way, “force” them to lower rates, but only because inflation is under control and not simply because he wants them to.
All this to say that if you’re looking for rates to come down before buying that house, I’m afraid neither Biden’s policies nor Trump’s wishful thinking will help you out much, and you’ll only be watching property values rise faster than interest rates drop.
2. California fires And Hurrican Helene
Within the last 3-4 months, we’ve had two horrific natural disaster events that have/will put a strain on supplies for homebuilding. Thinking back to basic economics, when there’s a strain on the supply, we all know prices only do one thing: go up, up, and away.
As we head into the busiest time of the year for home building, we are adding a significant number of unforeseen “new builds” to the equation. These additions will inevitably drive up building supplies, making home building that much more expensive.
3. Tariffs of 25%
Trump has threatened to impose tariffs on all imports and already has on some. He’s specifically threatening a 25% tariff on Canada, a major supplier of lumber to the US. He’s also threatening to do the same to Mexico, a major supplier of other building goods to the US.
Will this threat materialize into true policy? I doubt it, but it’s something to watch for sure. Even the threat of it can drive prices higher, and if it actually becomes policy, it could have unintended consequences for the home-buying market.
4. Deportations
Again, this is simply something to keep an eye on. Trump has signed an executive order, but we do not know how this will play out yet, and there might very well be some unintended consequences for the home-buying market.
We have to keep in mind that a vast segment of the construction workforce is made up of people without US citizenship. If the policy reduces the workforce, we return to basic economic principles. When the workforce supply is down, prices increase, and projects get delayed. If workers can demand more pay because there are not enough of them to go around, the cost has to be made up somewhere, and that somewhere is in the price you pay for the home.
5. Looser regulations
How regulated should an industry be? Well, that’s not a discussion for our site. However, with the new administration, regulations are being removed and reduced. Red tape is being cut. This will have a varying impact on home prices as not all building regulations are under Federal purview, but there are a good many that are.
If deregulation does come, it will have a lowering effect on the cost of labor and goods. That would be a win for the price of building a home. Which in turn affects the price of a home.
6. Foreclosure rates
In October of this past year, foreclosure rates were down 11% year over year but up 4% month over month. Why does this matter?
It simply tells you the strength of ownership in the housing market. When foreclosures are on the rise, we can expect more homes with lower values to hit the market. This is because banks are taking ownership of homes and then looking to remove them from their balance sheets at discounted prices.
When foreclosures are weak, the market can continue to move up.
Even though the month-over-month increase is 4%, I consider the market strong, with an 11% year-over-year decrease. Unless we see three months of downturn, I wouldn’t expect a change in the direction of the year-over-year decrease and would consider the 4% print an anomaly.
If the market stays strong, then prices will rise.
7. Existing Home Sales
Existing home sales dropped to their lowest low since 1995.
In layman’s terms, this means people who own a home say, “Nah, bruh, we’re good; we’re staying put.”
This, of course, is due to the historic number of homeowners with fixed mortgage rates under 3.5%.
But what does that mean for the market? In my view, fewer people are climbing the housing ladder, which doesn’t free up lower rungs for new people to start climbing that ladder.
If no one is climbing, then it limits inventory, and if the inventory is limited, well, we are back at supply and demand. And for the sake of beating the same drum, let’s all say it together. If there is limited supply, prices will go up.
8. Final thoughts.
Several other factors can affect the housing market price, but the above should give you a good idea of what to expect. Of course, if you have a question, I’m happy to help where I can. Let us know in the comments or through email.
Looking at the data, I anticipate market prices will continue to increase, while rates might settle between 6.25 and 6.75% by the end of the year.
As I discussed here, I still anticipate a market correction, but it looks like it will be postponed to 2026.
As we have said, if you are buying, selling, or interested in getting involved in the Nashville real Estate market, reach out to us. We’d love to help. And if you need help finding a good real estate agent in your current or new location, we’d be happy to help you with that as well!
You can sign up here so we can start the process. If you aren’t in Middle Tennessee, contact us here, and we will take care of you no matter where you live. There is no reason to go it alone.
Let us know if you have any questions. Have an inspired day!
