Everything You Need to Know About the Real Estate Market Predictions for 2024-2025

As we are already in the year 2024, the real estate market is poised for significant changes, influenced by a mix of economic factors, demographic shifts, and technological advancements. Mortgage rates, which have been a key driver in recent years, are expected to fluctuate, potentially easing affordability challenges for buyers. However, the impact of inflation, the pace of new construction, and local market dynamics will play crucial roles in shaping home prices and sales activity.  

Additionally, the ongoing influence of remote work, evolving buyer preferences, and the integration of AI into the real estate industry will also affect market trends. By 2025, we may see a more balanced market with increased inventory, particularly as current homeowners with low mortgage rates consider selling.  

Predictions of the Real Estate Market 

Due to the Pandemic Housing Boom, the housing market has seen several ups and downs. Short supply and high demand for housing options have led to an appreciation of property values over the last 2 years. But with a lot of talk about a housing crash coming soon, many investors are now feeling unsure of where the market currently stands and how it will be in the coming year. So, without further ado, here are real estate market predictions for 2024-2025 that’ll help you plan and protect your investments: 

Prediction 1: A Seller’s Market 

A housing market prediction several experts agree upon is that it is going to be a seller’s market. With more demand and less supply, home prices are expected to keep rising for some time.   

Prediction 2: Mortgage Rates 

The mortgage rates have reached the 6% barrier making it very expensive to buy a house or get a mortgage. While research firm Capital Economics is predicting that the house price rise is likely to slow down in the coming year, it is also forecasting that the mortgage rates could increase to 6.5%. 

Prediction 3: Interest In Becoming Homeowners 

Despite the high home prices and a predicted (albeit disputed) house market crash, interest in homeownership remains strong. The demand for homes will predominantly come from younger homebuyers and first-time homebuyers. This is likely due to the fact that property rental rates are now reaching record highs. 

Prediction 4: Hybrid Work Schedules Are Likely Here to Stay 

In late June, Kastle System’s Back to Work Barometer revealed that 51.4% of office space was occupied in the country’s 10 largest cities, reflecting a significant improvement from the 15% rate in mid-March 2020. Despite progress, occupancy remains below pre-pandemic levels. Stanford economist Nick Bloom’s research indicates that employers anticipate an average of 2.2 remote workdays per week, while employees prefer about 2.7 days. A compromise of 2.5 days could impact both the housing and office markets moving forward. 

Prediction 5: Changes in the Ways Homes Are Built 

AI is set to introduce a range of innovative homebuilding methods, including 3D printing, factory-built components, and waste-reducing software. These advancements will likely enhance building quality and accelerate construction timelines. Additionally, property insurers will play a larger role in shaping construction practices to address risks like wildfires, floods, and hurricanes. 

5 Reasons on Why There Will Be No Housing Market Crash 

Here are five reasons why a housing market crash is unlikely: 

1. Low Inventory Levels 

The housing market is experiencing a notable shortage in inventory. Ideally, a balanced market has a 5-6 month supply of homes, but as of June, there was only a 4.1-month supply, an improvement from just 1.7 months in early 2022. This persistent lack of supply keeps prices high and indicates that a price crash is unlikely. 

2. Slow Construction Pace 

Builders have not returned to the construction levels seen before 2007, and current efforts to boost supply are not enough to rapidly meet demand. The slow rate of new construction, along with regulatory and land acquisition challenges, makes overbuilding and a price crash unlikely. 

3. Demographic Demand 

Home demand remains robust due to several demographic trends. Millennials are reaching their peak homebuying years, while the Hispanic population is increasingly pursuing homeownership. Moreover, the rise of remote work has led many Americans to seek larger homes, intensifying demand further. 

4. Strict Lending Standards 

In 2007, lenders frequently offered “liar loans” without requiring income documentation, allowing almost anyone to secure a mortgage regardless of credit history or down payment size. Today, lenders maintain high standards, with most new mortgage borrowers boasting excellent credit. In the second quarter of 2024, the median credit score for new borrowers was an impressive 772, according to the Federal Reserve Bank of New York. While a return to lax lending standards could raise concerns about a potential market crash, the current trend is quite the opposite. A recent Federal Reserve survey shows that lending standards have tightened further in preparation for increased demand as rates eventually decrease. 

5. Muted Foreclosure Rates 

After the housing crash, foreclosures surged and drove prices down. However, things have improved significantly. Today, most homeowners have substantial equity in their homes. During the pandemic, lenders avoided issuing default notices, which kept foreclosures at record lows in 2020. While there has been a slight increase in foreclosures since then, they are still much lower than before. 

Pro Tips for Buyers and Sellers 

Here are some expert tips to help you succeed in today’s competitive housing market. 

Pro Tips for Buying in Today’s Real Estate Market 

1. Know your Budget: Understand your budget by focusing on what you can afford as a monthly payment rather than just the price of a home. Your monthly housing costs depend on the home’s price, your down payment, mortgage rate, loan term, insurance, and property taxes. 
2. Be Flexible with Size and Location: Your budget might allow for a cozy home in your ideal neighborhood or a larger, newer home a bit farther away. By knowing your priorities and remaining flexible, you can act swiftly when the right property becomes available. 
3. Monitor the Market in Your Desired Area: Track the available inventory and price levels in your target neighborhood. Also, observe how quickly homes are selling. This will help you stay alert to great opportunities and feel more confident when you find a well-priced home. A real estate agent can assist with this. 
4. Stay Encouraged: Buying a home is a major financial decision. Approach the market with confidence, backed by solid information and realistic expectations. Avoid letting the fast pace of the market push you into a purchase that exceeds your budget or doesn’t fit your lifestyle. 

Pro Tips for Selling in Today’s Real Estate Market 

1. Research Comparable Home Prices in Your Area: Sellers should stay informed about current prices for similar homes in their market. Understanding market competition is crucial for pricing your home competitively. Additionally, be aware that at certain price points, it may be a buyer’s market, so you might need to be flexible and make some concessions. 
2. Ensure Your Home is in Excellent Condition: To stand out and attract buyers, your home should be in top shape with strong “online curb appeal.” Well-maintained properties and appealing front yards are key features that attract prospective buyers. 
3. Partner with a Local Real Estate Agent: A local real estate agent or team with a robust marketing presence and connections to major real estate platforms can provide substantial value and assist you in securing a great deal. 
4. Address Issues Promptly: Make necessary repairs or improvements to prepare your home. Eliminating potential buyer concerns allows them to focus on the home’s positive features. 

How Can Investors Protect Themselves in These Unpredictable Times? 

With varied predictions for the real estate market, how does a real estate investor protect oneself from a possible house market crash? Here are a few tips: 

Avoid Resident Turnovers 

Extended vacancies can lead to extreme loss of revenue. You can reduce tenant turnover by: 

• Avoiding big rent increases 
• Responding to residents’ complaints and questions promptly 
• Ensuring the rental premises are well-maintained 
• Giving incentives to residents to sign a longer-duration agreement 

Smart Investing 

Thoroughly researching a property is the first step towards smart investing. When you study the market, you know which properties are Cash Flow Properties. Investing in these will lead to positive cash flow, regardless of the market situation.   

Choosing BFPM As Your Property Management Company 

Not only can Beach Front Property Management maximize your rental portfolio, but we can also optimize your rental property to increase your profits. The housing market will keep changing. To stay ahead of the curve, having the ability to adapt to the times will come in handy. What will also help is talking to BFPM property experts who can help you resolve all property-related queries. To begin with, you can schedule a 15-minute consultation call with us. 

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