As 2024 comes to a close, the U.S. median home price has reached another all-time high. While modest appreciation was predicted, home values have continued to rise quickly. With the recent election behind us, we now have insights into the new administration's economic approach. Looking ahead to 2025, it’s crucial to be informed and prepared. Stay proactive and take advantage of the current market dynamics.
Here’s a look at what’s on the horizon for 2025 and how to prepare.
INFLATION EXPECTED TO RISE
The new administration aims to reduce regulations, lower taxes, and advocate for lower interest rates. This pro-growth agenda is likely to fuel inflation a proposed mass deportation policy could lead to a labor shortage, potentially driving up wages. Higher inflation typically leads to rising real estate values, meaning your home—and your neighbors’—will likely be worth more this time next year.
LOW INVENTORY CONTINUES
From a peak of 6 million transactions in 2021 to under 4 million in 2023, the 2024 numbers look to be right around 4 million again. High interest rates are largely responsible, discouraging homeowners from selling. Rates are unlikely to drop significantly until mid-2025 and currently stand at just over 7% for a 30-year fixed mortgage.
CURRENT BUYING CONDITIONS (December 2024)
With interest rates over 7% and the seasonal slowdown in Michigan, homes are lingering on the market, often without bids. This is an opportune time to start shopping, especially if you have a contingency to sell your current home. Sellers with homes on the market now often need to sell, creating a window for buyers to negotiate below market value. Don’t miss the chance to secure a great deal during this buyer-friendly season.
FIRST-TIME HOMEBUYERS FACE CHALLENGES
The scarcity of entry-level homes has led to rapid value increases in traditionally affordable areas. In Michigan, many entry-level homes were built in the 1940s-60s and often lack updates or compliance with modern standards. With high material costs, buyers are bypassing outdated inventory. In 2025, savvy first-time buyers will be eyeing fixer-uppers, learning renovation skills to add sweat equity to their purchases.
VACANT LAND IN HIGH DEMAND
As the new administration plans to ease building regulations, vacant land is expected to attract developers and builders. Michigan’s restrictive building policies have led to more “site condos” with Homeowners Associations. With regulations likely to loosen, developers will be eager to acquire land in 2025. If you own vacant land, assess its value carefully before selling.
SPRING 2025 BUYING FRENZY
The spring market, especially post-Super Bowl, is set to be competitive, with multiple offers, over-asking bids, and a preference for cash buyers. Sellers looking to upsize will be listing homes, and the process of selling and buying simultaneously will require careful planning. Start preparing after the holidays if you’re planning to enter the spring market. Small updates to your home now can make a big difference in this hot housing market.
Happy Holidays and Go Lions!
-Brett Knybel & Alex Klott
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