What Will Happen to Home Prices When Mortgage Rates Decline?
It’s an important question because in 2025, rates are going to lower.
Not because of inflation drops, because 3% inflation is here to stay due to supply constraints and US government regulations, and high debt. Instead, it will be political pressure that will do it.
Of course, the stock market and housing market have never had such intense artificial pressures and restrictions placed on it, during a big change in global economics. It’s very difficult to know how it will play out with politics, but common sense tells us that with a massive group of buyers combining with sellers who can finally sell, we’re going to see record home sales in 2025/2026.
The Push for Lower Interest Rates
And there are millions of buyers waiting for that glorious moment when they can finally bid on a house. And there’s those who want to avoid refinancing and seeing their mortgage double. The public will scream loudly for lower rates.
That means lots of enthusiasm for lower interest rates. The FED will delay, and when President Trump lowers stimulus spending, cuts harmful regulations, and fully enacts a pro-American economic agenda with manufacturing repatriation, it’s going to be some interesting years ahead.
The Pro-American Agenda
In terms of the investment community which may push money into homebuilding, hedge funds and billionaires may turn face and support American business. That means divesting their China investments and beginning to rebuild America.
We are into the xChina era, and that bodes well for home buyers who need good paying jobs and where home building is urgent. Will President Trump support home building? That’s one of the big question marks. If he were to remove illegals, it would free up a lot of housing, resulting in lower home prices and lower rents. That solves a lot of problems.
Some are suggesting a housing market crash, but with buyer demand from young buyers and massive demand from illegal aliens, there’s not much chance a house/condo will go unbought or unrented now.
As this Fannie Mae forecast chart shows, the expectation for home prices is a steep rise through the next 5 years.
Further, Goldman Sachs has these home price projections for the next 3 years: 2024:+3.8%, 2025:+4.4%, 2026:+4.9%, and 2027:+4.9%. They might be of the opinion that interest rates are not going to drop, that the FED will keep on giving it to the American working class.
Moody’s US home price forecast is much lower; 2024: +1.5%, 2025: +0.3%, 2026: +0.9%, and 2027: +1.7%.
Moody’s states: “We expect housing demand to remain firm, reflecting supportive demographic trends and a healthy labor market. The combination of modestly higher supply growth and firm demand should result in only a modest increase in the homeowner vacancy rate.”
However, if a flood of homes for sale results, it stands to reason prices will come under pressure. And as older babyboomers are able to sell their homes to millennials in the next 5 years, they’ll be listing en masse.
Forecasting your own Sales Outlook?
The home price chart for the last 14 years shows inflated prices, however without sufficient supply, they’re not going down. And as rates drop and incomes begin to rise under the Trump admin, buyers will want to buy houses. So that supports Goldman Sach’s and MBA’s price outlooks. High prices and eager buyers, along with lower taxes spells financial windfall for Realtors in the next 5 years and beyond.
When Mortgage Rates Drop
The most obvious result will come from lower mortgage payments, which means more buyers will be able to afford the down payment and price. Bids will rise and home prices will rise from that. The most likely scenario for the 2025 real estate forecast is higher home prices. MBA is predicting a rise in home building in 2025 and 2026, but with a stagnant high interest rate, inflationary environment, it just doesn’t make sense.
Terry Loebs, founder of Pulsenomics, says “the price surge of over 50% nationwide since early 2020 has created a high hurdle that will, unfortunately, keep many aspiring homeowners on a slower path to achieving their dream.” So the backward looking, stats-dependent view is not all that inspiring.
The Fannie Mae Home Price Expectations Survey of 100 housing market experts which is a pretty well round set of predictions, sees home prices rising 3.2% in 2025.
The Presidential Election Will be the Key Housing Market Catalyst
However, the experts don’t know if Biden or Trump will win the Presidential election. It’s a guess.
Biden would keep the status quo, which would be excruciatingly painful for most Americans. A stagnant economy along with lower home building, uncontrolled flow of illegal aliens over the southern border, and a desperate group of Gen Z’s and Millennials who want to buy. That still supports level pricing.
The experts expect a lull in the next 6 months leading into 2025. Listing are growing, but fewer people are eligible to buy and many are fearful of a price crash if the economy goes sour. It’s a risky time buy with prices at their all time peak, and an economy dominated by a small number of international corporate monopolies.
Small business stocks for instance haven’t fared well and continuous high interest rates till lead to more insolvencies. Small business supports more home buying than any other type of business.
Locked in Mortgagees Finally Freed
As Fanny Mae points out, lowering the mortgage rate would allow “locked in” mortgage holders to finally list their homes, which would drop home prices. More supply means lower prices. For buyers, it looks like a dreamland. It may happen.
What does lower home prices do for the market. Home prices may not fall too much despite the flood of homes. It’ll be a time of massive residential real estate sales and mortgage financing transactions. Mortgage agents will be delighted too.
And real estate agents, who’ve been trudging through a sales desert for a long time now, will find sales easy to get. Those agents who are ramping up their online visibility, building their Realtor brand, and getting positioned in the minds of buyers and sellers will get rich.
If you’re an ambitious Realtor, it’s wise to get onto this now. Take a look at my real estate marketing packages and consider hiring me. There’s no set, easy way to win online. It’s going to take creativity, professional assistance, and determination.
Your sales career is everything. It’s like buying stocks before the boom! Don’t let this one pass.
These sales years coming up are likely to the best ever. I’d enjoy seeing you win!
