The housing market in America has been quite tough in the last few years. Lack of affordable housing, rising rents, and high mortgages have resulted in a decline in home sales and a sharp rise in homelessness. In 2024, the United States witnessed an 18.1% rise in homelessness, as per a report by PBS. As per the National Association of Realtors, the sale of previously occupied homes fell to the lowest level in nearly 30 years.
A CNN report revealed that 86% of Americans wanting to buy a house can no longer afford it. Housing was a key issue during the 2024 presidential elections in which Donald Trump returned to power. Trump linked the housing crunch to immigration, saying it is “driving housing costs through the roof.” Upon returning to the White House, his first step was to tackle the issue of immigration by deporting thousands of migrants and making entry to the US tougher than ever.
2) 📉 First of all, why is the housing market in decline?
It’s basically a part of the Fed’s strategy for how to get the spiking inflation under control close to the target of 2%. https://t.co/s8DgPsXbCY pic.twitter.com/VRRpvmX10S
— FORTUNE (@FortuneMagazine) September 2, 2022
But the question that lingers in every US citizen’s mind is — What is the fate of the US housing market in 2025? Well, the answer to this isn’t quite uplifting! The year started on a sad note as the wildfires added stress to residents in South California in an already expensive market.
Experts have predicted that 2025 might not be much different from the last few years when it comes to the housing market. As per J.P. Morgan research, we can witness a minimal growth of up to 3% this year, but at large, the year looks frozen. It also reported that the mortgage rates are expected to ease only slightly to 6.7% by the end of 2025.
Donald Trump, in his campaign, promised to cut down housing costs via tax incentives, encouraging development and making land available for building homes. However, some of his policies have complex implications onto his vision to make housing cheap for Americans. This includes imposing tariffs on steel and aluminum.
Moreover, just by deporting migrants and reducing demand, the housing crunch can’t be solved. John Sim, head of Securitized Products Research, J.P. Morgan, explains that “cutting immigration would mean cutting labor supply in the construction industry, which could end up exacerbating the lack of affordable housing.”
9) However, if the overheated U.S. labor market persists, mortgage rates could go even higher, and the Fed would need to tighten even more aggressively, according to @Markzandi chief economist at @economics_m. https://t.co/s8DgPsXbCY
— FORTUNE (@FortuneMagazine) September 2, 2022
The housing market will improve when housing supply is increased. When the mortgage rates would come down, more sellers would enter the market and list their homes for sale, thus increasing the number of houses for sale.
John Sim points out that the current housing crisis is directly linked to interest rates. He said, “The situation is not going to change until we get mortgage rates back down toward 5%, or even lower.”
For those concerned about a potential housing crash shall remain take a sigh of relief as the chances are quite low. As per Forbes, Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, said, “The record low supply of houses on the market protects against a market crash.”
Experts also pointed out that homeowners today are on much more secure footing in comparison to the 2008 financial crisis, as many have substantial home equity. Moreover, a good percentage of homeowners are now mortgage-free.
For now, we suggest you to sit tight and remain hopeful. The housing market will recover when the housing inventory increases and the mortgage rates come down. 2025 might be the beginning of the recovery from three years of dull phase.
