2024 Summary: There are four major themes that have shaped our real estate market that will continue into 2025 and beyond. Local, state, and federal governments have become the most significant players in determining how these themes will continue in the years to come.
Housing Inventory – There are only three ways housing inventory becomes available to buyers – resale (however sellers are not wanting to trade in their low-rate mortgages by moving), new construction and foreclosures.
Housing Starts – This measure of housing production by new home builders has been lagging since the recession that began 16 years ago. The United States is estimated to be short over 5 million housing units due to underbuilding. Builders have been plagued with challenges including lack of skilled labor force, supply chain shortages, lack of buildable land, permitting requirements, timelines, building costs, additional regulations, and heavier carrying costs.
Housing Affordability – Housing affordability is a challenge in our country. It is a concern for homebuyers (who are getting mortgages with interest rates in the 6-7% range as opposed to 3-4% of just a few years ago), as well as for homeowners who are having to pay higher property taxes on higher assessed values, higher utility rates, higher insurance premiums, and, in some cases, higher HOA rates.
Generational Housing Needs – According to the Urban Institute, 45% of people ages 18-29 are living at home with their parents, which is the highest this number has been since the 1940s. Freddie Mac has indicated the housing shortage has kept more than 1 million additional households from being formed due to pricing because adult children continue to live with their parents.
The Louisville housing market trends in 2024 showed a continuation of the patterns we have seen in recent years, including strong demand for homes, limited inventory, and rising home prices, which has continued the seller’s market.
2025 Predictions: It is very difficult to predict several important housing factors following the November election. Future policies that affect regulation, inflation, immigration, trade, mortgage market institutions, and the economy will all impact the housing market.
Will mortgage rates come down? Mortgage rates are projected to decrease slightly due to the easing of inflation and a rise in unemployment rates. Rates could settle in the mid-to-low 6% range by the end of the year. While slightly lower mortgage rates are not expected to bring a flood of buyers and sellers back to the market, they certainly will get more people moving.
Will home prices fall? Home prices will continue to increase this year but at a slower rate. On average, experts forecast home prices will rise roughly 3% in 2025.
Will inventory stay the same? The market will see an increase in both the supply of available homes on the market, as well as a rise in demand. 2025 will continue the trend of rising inventory across the country, growing by more than 10% with more homes selling in 2025 than in 2024.
For additional information on the real estate market, please call or text: 502.435.1150 or send an email to pmcgeecombs@kyselectproperties.com.
