To the moon

Posted on March 9, 2025 by grim

From the Realtors:

Revealed: America’s Hottest Housing Markets—and Why Some Buyers Are Happily Paying Over Asking in These Popular Spots

New Jersey market is heating up

Philadelphia, grouped together with parts of New Jersey and Delaware, saw the greatest improvement in its market hotness, jumping 77 spots year over year. New York City, clustered with other sections of New Jersey, emerged as the second-most-improved market, having gone up 48 spots in the rankings, followed by Kansas City, MO, which was 45 spots hotter.

In New Jersey, portions of which ranked at 58th and 206th on the February hotness list, many counties are seeing homes sell in a matter of days, and tens or even hundreds of thousands of dollars over the asking price, thanks to a combination of scarce inventory and frenzied demand.

New Jersey real estate agent Joseph Aziz, with Joseph Aziz Real Estate, tells Realtor.com that he has been seeing buyers willing to pay extra to get into a home in a good location boasting top-notch schools, shopping districts, and parks.

“Ever since COVID started, the prices have been going up,” Aziz says. “There are a few periods of a two-to-three month span where the prices stay the same, but then it continues to go up.”

The agent adds that the only time you see price cuts in New Jersey nowadays is when “the property was aggressively overpriced” from the outset.

One example of New Jersey’s overheated real estate market comes from Bergen County, where in late October 2024 Aziz sold a five-bedroom, 4.5-bathroom home on a quarter-acre lot in Paramus for $1,725,000—which was $125,000 over the asking price. 

Aziz says that it took him just six days to offload the property. During that time, he hosted two open houses, which attracted 130 house hunters and generated 27 offers.

The buyers were locals looking to upgrade their housing situation, Aziz recalls. They agreed to shell out six figures over the listing price without a home inspection or an appraisal, all because they were eager to close on a property with a good layout priced below $2 million.

Asked if he was surprised that his clients were willing to pay such a sizable premium, he says: “Not at all. I expected it to go over more. But I think [mortgage] rates being over 6.5% stopped it from being worse.” 

Aziz explains that the local market is “very, very competitive,” especially when it comes to properties less than 10 years old with a larger square footage and a decently sized parcel of land.

“Less and less homes are being built, and people are choosing to renovate instead of build, so new construction is becoming harder and harder to secure,” he notes.

Posted in Demographics, Economics, Employment, Housing Bubble, New Jersey Real Estate | 51 Comments

Northeast continues to buck the trend

Posted on March 7, 2025 by grim

From CoreLogic:

US Home Price Insights –  March 2025

Home price growth remains largely flat in the U.S. as we come out of winter. Although prices are expected to eek out gains in the coming year, there are stark differences between regions.

The Northeast continues to buck overall national trends, remaining unbothered by slower job growth, elevated interest rates, and ongoing affordability concerns.

Meanwhile, in the Mountain West, prices are the furthest from their record highs. In Hawaii, prices declined by 4.4%.

Despite this, national single-family home prices are forecast to reach a new peak in March 2025. Currently, the median sales price for all single-family homes in the U.S. is $375,000.

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate, New Jersey Real Estate | 98 Comments

Spring Market!

Posted on March 6, 2025 by grim

From the Record:

Listings in NJ have increased, but remain well below 2024 levels. Our Feb market update

The spring market — which has typically been considered the busiest time for real estate — has brought most New Jersey counties a significant increase in new home listings from the start of 2025. But the Garden State’s inventory is still much lower than last year.

Overall, New Jersey had a total of 11,851 active home listings in February, including 6,902 new listings. This was a 4.96% decrease from last year, but a 7.11% increase from January 2025, according to Realtor.com’s monthly market data. The state also had a median listing price of $544,950, which was 1.5% more than last year and 1.86% more than last month.

As for the number of days active listings stayed on the market, listings in the Garden State typically stayed up for about 44 days. This was 14.29% more days than this time last year, but 23.48% fewer days than January 2025, according to Realtor.com.

And across the nation, February marked the 16th straight month of housing inventory growth, with a 27.5% increase, according to Realtor.com’s Monthly Housing Market Trends Report. The median price of homes for sale in February was $412,000, down 0.8% from last year, and homes spent about 66 days on the market.

Mortgage rates also dipped, although only slightly, during February. Rates for a 30-year fixed mortgage ranged from 6.76% to 6.89% and rates for a 15-year fixed mortgage ranged from 5.94% to 6.09%, Freddie Mac reported.

North Jersey’s spring market is kicking off a bit slower than it was this time last year, with Bergen, Passaic, Morris and Sussex all seeing decreases in new listings — with three of them being by more than 17% — compared to February 2024. On the other end, Essex and Hudson counties saw an increase in new listings during this time.

  • Bergen: 592 new listings (-2.63%)
  • Passaic: 202 new listings (-17.89%)
  • Morris: 300 new listings (-20.63%)
  • Essex: 412 new listings (13.81%)
  • Sussex: 144 new listing (-21.74%)
  • Hudson: 376 new listings (0.53%)

In North Jersey, Morris, Essex, Sussex and Hudson counties had active listings stay on the market for more days in February than this time last year. Meanwhile, Passaic County had active listings stay on the market for less days in February than this time last year, while Bergen County saw no change.

  • Bergen: 33 days (0%)
  • Passaic: 31 days (-10.29%)
  • Morris: 31 days (9.91%)
  • Essex: 33 days (8.2%)
  • Sussex: 50 days (12.36%)
  • Hudson: 41 days (0.61%)

Sussex and Hudson counties were the only places in North Jersey that saw median listing prices decrease from this time last year. Sussex County had a 0.63% decrease with a median listing price of $399,950, while Hudson County had a 5.76% increase with a median listing price of $612,500. Otherwise, all other North Jersey counties saw an increase.

  • Bergen: 2.62%
  • Passaic: 4.23%
  • Morris: 0.07%
  • Essex: 9.98%
Posted in Demographics, Economics, Housing Bubble, New Jersey Real Estate | 146 Comments

Tariffs good for home prices?

Posted on March 5, 2025 by grim

From CNBC:

Here’s how tariffs will hit the U.S. housing market

From lumber to drywall to appliances to finishings, much of what goes into a U.S. home comes from outside American borders.

The cost of those products is about to go up, as President Donald Trump’s administration imposes tariffs on China, Mexico and Canada. Goods from China are now subject to a 20% tax, an increase from a previous 10% tax, and those from Canada and Mexico face a 25% tax. Canadian lumber was already subject to separate duties of 14.5%.

The new tariffs could increase builder costs anywhere from $7,500 to $10,000 per home, said Rob Dietz, chief economist at the National Association of Home Builders, citing estimates from U.S. homebuilders. Last year the NAHB estimated that every $1,000 increase in the median price of a new home prices out roughly 106,000 potential buyers.

The greatest impact to homebuilders will be from lumber cost increases, which are expected to total about $4,900 per home on average, according to Leading Builders of America, the trade group representing most of the nation’s publicly traded homebuilders.

Roughly a third of the lumber used in U.S. homebuilding comes from Canada, and domestic lumber producers are expected to raise their prices to match the imported supply.

“Since Trump first imposed the tariffs on Feb. 1, which were then delayed, we’ve seen some increase in buying with prices for Western Spruce-Pine-Fir two-by-fours increasing 13%,” said Paul Jannke, principal at Forest Economic Advisors. “With the re-imposition of the 25% tariff on Canadian goods shipped to the U.S., we expect Canadian producers will stop shipping lumber to the U.S. Meanwhile, dealers, who have been hesitant to buy given uncertainty around the tariffs, will need to step up purchases ahead of the coming building season. This will drive prices higher.”

Lumber futures are up 5% in the past week and were rising steadily Tuesday. 

Posted in Crisis, Economics, Housing Bubble, National Real Estate, Politics | 110 Comments

Crash starts in Florida?

Posted on March 4, 2025 by grim

From the NY Post:

Is Florida heading towards a new housing crisis?

A housing crisis is brewing in Florida.

A confluence of decreased homebuying and increased housing stock has created a perfect storm for would-be sellers in the Sunshine State. 

The number of unsold homes in Florida rose almost 23% year-over-year, according to a new report by Redfin. The stale housing stock and a surge of cancellations has led to plummeting home prices. Some sellers have slashed prices up to 40%, and others have taken almost half a million off their asking prices, according to the Daily Mail.  

Housing experts point to the state’s untenable housing fees, a glut of new post-pandemic housing stock and, of course, natural disasters.

“Bidding wars are very rare these days,” Jacksonville real estate agent Bryan Carnaggio said in a statement in the Redfin report. “With this many houses for sale, a home basically needs to look like it’s out of a magazine — and be priced fairly — to get multiple offers.”

“The end of January saw 172,209 unsold homes in Florida — the state’s highest unsold inventory since Redfin began collecting data in 2012.”

More than 41,000 home-purchase agreements in the US fell through in January, according to Redfin, and Florida recorded the highest share. Pending home sales in Florida fell 9.3% year-over-year in January.

The state’s condo inventory, in particular, is at an all-time high, according to Redfin. The single-family home inventory isn’t far behind. 

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 145 Comments

NJ going to cost you a little more next year

Posted on March 3, 2025 by grim

From the Star Ledger:

You won’t believe what N.J. is trying to tax now. Here’s the full list. 

The list of taxes and fee changes in the proposed budget include:

Brand-new taxes: The state anticipates collecting $277 million by taxing go-cart racing, laser tag, bowling, interior design services, horse training, vehicle trade-ins, some comped meals, tickets, and hotel rooms, digital services and second-hand airplane sales. Murphy also wants to end a sales tax exemption and the $20,000 sales tax cap on boats. 

Cigarettes, alcohol, and vapes: A tax hike of 30 cents, up from 10 cents, on vaping liquid would net the state $10 million. A 10% tax increase on alcoholic beverages would bring $18.5 million. The tax on a pack of cigarettes would climb 30 cents to $3.00, generating $41 million.

Luxury homes: Homes and other property with a pricetag between $1 million and $2 million would be assessed a 2% tax, up from 1%, and 3% percent tax on property that sells above $2 million. These increases are expected to generate $317 million in state revenue.

Internet gaming and sports betting: Casinos now pay a 13% tax on on revenues earned through sports betting and 15% on internet gaming proceeds. Murphy proposes raising both to 25%. The state expects to gain $402.4 million.

Taxes on marijuana license holders and “intoxicating” hemp products: License holders now pay $2.50 per ounce of cannabis under the Social Equity Excise Fee, but Murphy wants to raise it to $15 per ounce. A new $30 per ounce tax would also be levied on the sale of intoxicating hemp products. This would generate about $70 million.

Truck traffic: There’s a $2 truck traffic excise fee on warehouses, raising an estimated $20 million while also “mitigating the impact on new warehouse development.”

Guns and ammunition taxes and fees: Details were not released but the budget anticipates $8 million would be raised through a new excise tax on guns and ammunition, as well as higher firearm fees.

Drones: A new excise tax on unmanned aircrft systems, or drones would raise $5 million.

The proposed budget also eliminates some baby supply items from the 6.625% sales tax. They include cribs, strollers and nursing bottles.

Posted in New Jersey Real Estate, Politics, Property Taxes | 121 Comments

Who makes, who takes

Posted on March 2, 2025 by grim

From Bloomberg:

The Blue State-Red State Tax Divide Isn’t Really That Fair

The Trump administration’s many attempts over the past couple of weeks to halt federal spending have met mostly with approval from Republicans on Capitol Hill and outrage from Democrats. That’s sort of what one would expect given that Trump is a Republican, but also kind of weird in that states and congressional districts that vote for Republicans are as a rule much bigger net beneficiaries of federal spending than those that vote for Democrats.

With the federal government running a deficit of 5.9% of gross domestic product in the 2022 fiscal year — the most recent available in the state balance of payments data compiled by the State University of New York’s Rockefeller Institute of Government — even blue states got more back from Washington than they sent there. But their deficit amounted to just 0.4% of GDP. The red-state shortfall was 3.1% of GDP, with interest payments accounting for most of the rest of the federal deficit.

Blue states did receive more federal largesse per capita than red ones in 2022, but that can be chalked up to the anomalous cases of Maryland and Virginia, where many federal agencies and contractors are based (the District of Columbia is not included in these statistics). Remove those two states from the calculations and per capita spending is slightly lower in blue states than in red ones. And all but one of the 11 states that paid more into the federal government in 2022 than they got back out voted for Kamala Harris in 2024 (Utah being the exception).

It’s a pattern that reveals inequality as well as wealth: The district with the lowest income tax revenue in the US in 2022, New York’s 15th in the South Bronx, was just across the Hell Gate span of the Robert F. Kennedy Bridge (formerly the Triborough) from the district with the highest, and a 45-minute walk through Harlem from the third-highest. The second-lowest-revenue district, California’s 21st in the San Joaquin Valley, was about 60 miles as the crow flies from both the second- and fourth-highest. But in New York and California, the rich districts outweigh the poor ones, and both states send more to Washington than they get back.

Posted in Demographics, Economics, Employment, National Real Estate | 55 Comments

Good time to buy?

Posted on March 1, 2025 by grim

From Newsweek:

Should You Buy a House in March? Experts Weigh in on Housing Market

Heading into March 2025, potential homebuyers are facing significant challenges such as high mortgage rates, rising home prices and inflation. Additionally, factors like the threat of tariffs further complicate the market, creating more obstacles for buyers.

The housing market is experiencing significant fluctuations, with interest rates remaining high and inflation impacting affordability. These factors have broader implications for potential homebuyers, influencing their ability to secure favorable mortgage rates and find affordable homes. External factors, such as tariffs on key materials, could also drive up housing costs, further complicating the market for buyers.

Despite these challenges, there are opportunities for those who navigate the current conditions strategically.

The current housing market presents both opportunities and challenges for potential buyers. Mortgage rates remain a pivotal factor for buyers and have remained high, which had led to a decrease in mortgage applications to start the year, as buyers were hesitant to commit to higher monthly payments.

However, the Mortgage Bankers Association predicts that rates will gradually decline from 7 percent to 6.4 percent throughout 2025 and remain around 6.3 percent for 2026. With rates currently sitting at 6.75 percent, some buyers will want to take advantage of the recent decrease in rates, while others may choose to wait for further rate reductions before committing.

In recent months, the U.S. housing market has experienced a slight uptick in inventory. This can mean more options to choose from, potentially reducing competition for each home. Zillow forecasts a 0.9 percent home value growth in 2025, indicating a relatively slow pace. This modest increase suggests that as more homes are becoming available, prices will rise at a slower rate.

A Reuters poll suggests that housing affordability may see modest improvement this year, primarily due to anticipated interest rate cuts rather than an increased supply of homes. This implies that while financing may become slightly more accessible, the limited housing supply continues to pose challenges.
…

Both Beene and Kevin Thompson, founder and CEO of 9i Capital Group, recognize the impact of external factors, such as tariffs, on housing costs. Beene warns that tariffs could drive up prices by thousands of dollars and Thompson emphasizes how rising material costs will force builders to pass those increases onto buyers. Ultimately, both suggest that the housing market in March will remain difficult for buyers.

Despite these challenges, there are still opportunities for buyers who are willing to navigate the current market conditions. The Texas Real Estate Research Center told Newsweek buyers who have flexibility in negotiations or the ability to walk away from unfavorable deals will benefit most from shifting market conditions.

Beene suggests homebuyers looking for new homes might benefit the most. He notes new home builds are being offered at more aggressive pricing, as these properties started production when housing was easier to move. And Thompson notes cash buyers have an advantage, as they do not rely on banks and have more pricing power in any market.

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 68 Comments

NJ Wealth Tax

Posted on February 28, 2025 by grim

From northjersey.com:

Is Murphy’s proposal to increase NJ’s ‘mansion tax’ a good thing? Experts have concerns

Gov. Phil Murphy’s 2026 fiscal year budget proposal includes $1.2 billion in new sales taxes and fees on things like alcohol, warehouse truck traffic, drones and several services that are not currently taxed, among other things.

But one of the biggest topics of contention is a proposed tax increase that would make buying a house in New Jersey’s already pricey real estate market that much more expensive.

The New Jersey mansion tax — formally the “Additional fee on certain transfers of real property over $1 million” — is currently a 1% fee on residential and commercial sales of more than $1 million. This fee is typically paid by the property’s buyer at the time of closing, but it can be negotiated to be covered by the seller.

Under Murphy’s proposal, this tax would increase from 1% to 2% for residential and commercial sales between $1 million and $2 million. And properties that sell for over $2 million would be subject to a 3% tax.

“This increase is expected to generate $317 million in FY2026 and bring total collections to $554.2 million,” a summary of the proposed budget reads.

The New Jersey mansion tax was originally signed into law in 2004 by then-Gov. Jim McGreevey, a time when home sales of $1 million or more were far less common than they are today.

Overall, Zillow estimated that in 2024 there were 21 New Jersey municipalities with million-dollar starter homes. This was said to be an increase from 15 in 2023 and two in 2019, as previously reported by NorthJersey.com.

And as of this month, New Jersey had 86 towns with median listing prices of more than $1 million, according to Realtor.com. This included 25 with median listing prices above $2 million.

Posted in Demographics, Economics, New Jersey Real Estate, Politics, Property Taxes | 268 Comments

Good luck buying that house

Posted on February 24, 2025 by grim

From Apollo:

Median Age of Homebuyers: 56

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 291 Comments

The future of NJ office parks

Posted on February 22, 2025 by grim

From RentCafe:

Record-Breaking 71K Apartments Set to Emerge From Office Conversions

Office-to-apartment conversions are surging in popularity, with 2025 set to reach a record-breaking milestone of almost 71,000 units in the pipeline. This surge comes amid a nationwide shortage of apartments for rent and intense competitionamong renters. More than just creating housing, this trend reflects a shift toward sustainable, community-focused urban spaces that cater to the evolving lifestyles and priorities of modern American cities. So, as remote work continues to reshape the workplace and a significant share of the U.S. office space remains empty, repurposing offices into residential spaces offers a practical response to the growing need for housing.

While the volume of office-to-apartments conversions is growing, indicating increased interest in this type of retrofitting, the carryover of pending projects from one year to another is quite large. This suggests that other factors like conversion feasibility, construction costs, and local incentives come into play. Of the 55,339 office-to-apartments in some phase of development in January last year, only 3,709 were completed by December, leaving 51,630 units that carried over into 2025. This, combined with 19,021 new proposed conversions, represents a significant 28% year-over-year growth in the pipeline at the start of 2025.

Notably, innovative office-to-apartment conversions are by far the most popular type of adaptive reuse project, accounting for almost 42% of the 168,500 future conversion projects — a considerable growth from last year, when this category made up 38% of all conversions. This comes in the wake of rising vacancy rates in office buildings across the country, stagnating rents, as well as declining commercial property values. All of this helps make revamping offices into unique living spaces more financially viable.

Interestingly, this trend has seen remarkable growth in recent years. For instance, in 2022, the number of upcoming office-to-apartment conversions totaled 23,100 units before nearly doubling to 45,200 in 2023. Then, the growth continued in 2024, when the pipeline reached 55,300 future apartments. Now, in 2025, it’s climbed to an all-time high of 70,700 offices to be converted. This significant increase highlights the evolving nature of America’s cities that are driven by shifts in living preferences and changes in work habits. Thus, as office spaces are reimagined to meet the demand for housing, it’s clear that adaptive reuse is playing a key role in reshaping urban landscapes.

Posted in Demographics, Economics, Housing Bubble, National Real Estate, New Development, New Jersey Real Estate | 47 Comments

Where will spring ’25 go?

Posted on February 21, 2025 by grim

From the WSJ:

Home Sales Likely Fell in January

Home sales in January likely declined, as home prices and mortgage rates remained too high to attract buyers.

Sales of previously owned homes likely fell 2.6% in January from December, economists surveyed by The Wall Street Journal estimate. The data is seasonally adjusted.

The report, from the National Association of Realtors, is due at 10 a.m. ET.

Homes typically go under contract a month or two before the contracts close, so the January data largely reflect purchase decisions made in December and November.

Existing-home sales in 2024 fell to the lowest level since 1995 for the second straight year.

Posted in Demographics, Economics, Housing Bubble, National Real Estate, New Jersey Real Estate | 138 Comments

Trump axes NYC congestion tolls

Posted on February 20, 2025 by grim

From the Hill:

Trump declares New York ‘saved’ from congestion pricing: ‘Long live the king!’

President Trump on Wednesday declared New York “saved” after his administration announced it would rescind the Biden-era approval of a congestion pricing plan.

“CONGESTION PRICING IS DEAD. Manhattan, and all of New York, is SAVED.” Trump posted to his Truth Social. “LONG LIVE THE KING!”

The move pulls back a toll charging $9 for drivers to enter part of Manhattan, a plan that New York City and state officials had touted as reducing traffic and air pollution, while opponents argued it overburdened commuters. 

“New York State’s congestion pricing plan is a slap in the face to working class Americans and small business owners,” Transportation Secretary Sean Duffy said in a statement. “Every American should be able to access New York City regardless of their economic means. It shouldn’t be reserved for an elite few.”

Trump’s added call of “long live the king,” which was reshared on the social platform X by White House press secretary Karoline Leavitt, comes just after protesters rallied in cities across the country on Monday, dubbing the Presidents Day holiday as “No Kings Day.” Demonstrations took place in Washington, D.C., and New York City, among other places.

Other White House officials echoed the Trump-as-a-king illustration.

White House deputy chief of staff Taylor Budowich doubled down, posting on X a screenshot of Trump’s message alongside an image of the president wearing a crown against a city skyline. The official White House accountshared a similar image likening Trump to royalty, with the label “long live the king.”

Posted in New Jersey Real Estate, North Jersey Real Estate, NYC, Politics | 186 Comments

Don’t come here

Posted on February 19, 2025 by grim

From the Record:

Property taxes in NJ are still the nation’s most expensive.

Property taxes are a thorn in the side of homeowners. While many of us wish we didn’t have to pay them, we don’t have a choice. Just how much you pay depends on where you live, as taxes fluctuate from state to state and from town to town.

In the Garden State, property taxes are significantly higher than those in the rest of the country. In fact, New Jersey has the highest real estate tax rate in the nation, according to a recent report from WalletHub.

With an estimated effective real estate tax rate of 2.23% and a median home value of $427,600, the report found that New Jersey residents pay an average of about $9,541 annually in property taxes. WalletHub — which ranked all 50 states and the District of Columbia by their real estate tax rates — placed New Jersey in the report’s 51st spot.

Illinois has the second-highest real estate tax rate in the nation at 2.07%. Homeowners there pay about $5,189 in property taxes annually on a home with a median value of $250,500, according to the report.

Ranking third, Connecticut has a real estate tax rate of 1.92%, with homeowners paying about $6,575 on a home with a median value of $343,200. New Hampshire and Vermont round out the remaining top five states, at 1.77% and 1.71%, respectively.
…
“Americans who are considering moving and want to maximize their take home pay should take into account property tax rates, in addition to other financial factors like the overall cost of living, when deciding on a city,” said WalletHub Analyst Chip Lupo.

Posted in New Jersey Real Estate, Property Taxes | 188 Comments

“How can the housing market keep growing in 2025?”

Posted on February 18, 2025 by grim

From JP Morgan:

The outlook for the US housing market in 2025

The U.S. housing market is likely to remain largely frozen through 2025. Some growth is still expected, but at a very subdued pace of 3% or less. Demand — often understood through existing home sales (EHS) — remains exceptionally low. And though housing inventory is creeping back up, it still remains below the historical averages. 

“Existing homes for sale have reverted to more normalized levels across several key Metropolitan Statistical Areas (MSAs), and new homes have become fairly plentiful,” said Michael Rehaut, head of U.S. Homebuilding and Building Products Research at J.P. Morgan. “New homes for sale are at 481K, the highest level since 2007, and speculative homes for sale are at 385K, the highest since 2008. These metrics are roughly 50%/40% respectively above long-term averages. Supply should be less of a support for the housing market in 2025.” Nationally, single-family existing homes for sale are up roughly 20% year-over-year, but the number remains near record lows, around 20-30% below prior troughs.
…
But another key issue is at play, which is restraining supply more than any potential underbuilding. People are staying put for longer due to high interest rates, so housing stock is not being freed up. “The lack of supply is primarily a lock-in issue,” said John Sim, head of Securitized Products Research at J.P. Morgan. “More than 80% of borrowers are 100 basis points (bps) or more out-of-the-money. These are borrowers who have a significant disincentive to sell their home, and this is creating the dearth in supply.”

The current housing market stagnation is more closely tied to interest rates than anything else. “The situation is not going to change until we get mortgage rates back down toward 5%, or even lower,” Sim said. “And we aren’t forecasting mortgage rates to breach 6% in 2025 — they should ease only slightly to 6.7% by the year end.” Based on this, demand looks set to remain at exceptionally low levels.

The presence of vacancies is also suggestive of a demand issue, as lower vacancy rates point to potential supply constraints. Vacancies indicate that there are enough homes available, but these may not be the right type, in the ideal location, or at an affordable price point. 

With such low levels of supply and demand, how can the housing market keep growing in 2025? “The wealth effect from borrowers with significant home equity and/or equity market growth should maintain positive home price growth, though at a very subdued pace,” Sim said. While income has not kept pace with home price growth, existing borrowers are in good shape. And for those who own equities — particularly renters — there’s likely more money available toward down payments to effectively buy down the mortgage rate. Despite affordability challenges, this wealth effect helps to explain why home price growth is expected to continue. 

Posted in Demographics, Economics, Housing Bubble, Mortgages, National Real Estate | 130 Comments