Miami Real Estate Learning Center

WHAT TO EXPECT FOR THE HOUSING MARKET IN 2025?

Over the past year, homebuyers have stayed cautious, waiting for mortgage rates to drop and inventory to rise. Despite two consecutive interest rate cuts by the Fed in 2024, mortgage rates have steadily increased since last September, keeping buyers on the sidelines. Both buyers and sellers are looking for signs of movement in the housing market under the new Trump administration.

Markets are anticipating potential regulatory changes and supply-side policies that could have both positive and negative effects. While some proposed policies may increase housing supply, they could also fuel inflation, keeping mortgage rates high and contributing to ongoing market stagnation. This means a very boring year for me!

2025 Housing Forecast - Realtor.com’s 2025 forecast suggests gradual relief for homebuyers. Mortgage rates are expected to decline slowly, averaging 6.3% in 2025 and possibly reaching 6.2% by year’s end. While this represents some improvement, it is similar to the rates seen in September 2024. Housing prices are expected to rise slightly, but inventory will increase significantly. New single-family home listings could rise by 13.8%, and existing home listings by nearly 12%. This could help balance the market for the first time in nine years, with inventory reaching its highest level since 2019. As a result, competition may ease, and up to 20% of homes may see price cuts. However, sellers may remain hesitant due to persistent mortgage rates, prolonging market gridlock.

Impact of New Policies - Economists predict that while Trump’s proposed policies could free up land for development and reduce building costs, it may take years to see results. Additionally, his stance on reducing immigration could limit the construction labor force, driving up costs. As a result, while supply may improve over time, significant changes in mortgage rates or home prices are unlikely in the short term.



HOUSING DIVIDE: EQUITY GAINS VS. AFFORDABILITY CRISIS

The U.S. housing market is experiencing significant shifts, with homeowners sitting on a record $35 trillion in equity, more than double what was recorded before the 2008 housing crash. As property values surge, three main groups are emerging: those locked out of homeownership, those stuck in their current homes, and a lucky few able to cash out at historic highs (my lucky clients).

First-time homebuyers are facing unprecedented challenges. The share of first-time buyers has dropped to a record low of 24%, and those who do purchase are now older, with the median age rising to 38. In addition, single women are buying homes at higher rates than single men, though they tend to be older due to longer saving periods.

For young families, homeownership is becoming increasingly out of reach. Data shows that nearly 75% of homebuyers between July 2023 and June 2024 had no children under 18, marking a new low. This reflects not only delayed family planning but also the difficulty of affording homeownership in today’s market.

Meanwhile, existing homeowners are accumulating substantial equity as home values rise. On average, homeowners are sitting on $315,000 in equity, up from $186,000 at the pandemic’s start. However, many are hesitant to sell due to the prospect of higher mortgage rates. Nearly 70% of homeowners have mortgages under 4.5%, making it financially unappealing to move.



WALL STREET BETS BIG ON RENTAL HOMES....SHOULD YOU TOO?

Wall Street firms are increasingly investing in single-family rentals, betting billions of dollars on prospective homeowners who, priced out by high home prices and mortgage rates, are forced to rent for the time being. I personally think this trend is going to grow exponentially with higher insurance costs (after Florida's hurricanes and California's wildfires)

As millennials enter their home-buying years, many cannot afford the suburban neighborhoods with top schools. In response, more are turning to upscale single-family rentals. Developers, eager to meet this demand, are focusing on building rental homes instead of homes for sale.

The build-to-rent model is rapidly expanding, with institutional investors like Blackstone and Invitation Homes betting on the growing number of people opting for rentals as a long-term option. From 2021 to 2023, build-to-rent housing doubled, reaching 10% of all new single-family homes, according to the National Association of Realtors.

Rising mortgage rates and home prices have made renting more affordable. The average monthly mortgage payment is now 38% higher than apartment rents, making renting an attractive alternative . Sunbelt states like Texas and North Carolina are seeing the most growth in build-to-rent communities due to land availability and strong job markets.