Unlocking 2025: 5 Surprising Factors Behind a 10% Home Price Surge!
If you’re thinking about buying, the time to act is now. Today’s opportunity will look like a steal a year from now!
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Last year, I boldly predicted that the Bank of Canada would cut interest rates by two percent, a forecast that shaped 2024. And guess what? I was pretty much spot on—rates dropped by an impressive 1.75 percent!
Looking ahead to 2025, the central bank has a bit more wiggle room to lower rates further, but the heavy lifting is already done. This sets the stage for a significant comeback in residential real estate, especially for single-family homes (not including those pesky condos!). I predict a robust 10 percent price increase from 2024 to 2025. Here’s why:
Delayed Purchases Have Built Up Demand
The cycle of home-buying is almost instinctual. In the U.S., once you’ve saved up a decent chunk of change ($100,000 to $300,000, depending on where you are), the expectation is to dive into home ownership.
Despite some economic hurdles, there’s a steady stream of new buyers ready to jump in. Once they have the funds, they’re eager to buy, but the timing just hasn’t been right. However, the stars are aligning, and it’s only a matter of time.
Back in 2019, home sales in the U.S. hovered around 500,000 units. During the pandemic boom, sales surged to between 600,000 and 750,000. Fast forward to now, and sales dipped to about 450,000 units, despite significant population growth.
When mortgage rates began to drop, many thought demand would immediately follow. Instead, buyers have bided their time, creating a lengthy queue that paves the way for growth in 2025.
Price Cap Increase on Insured Mortgages
With the price cap for insured housing rising to $1.5 million (up from $1 million), along with 30-year amortizations for first-time homebuyers, the market is primed for a boost starting this month.
In hot markets like Los Angeles and New York City, decent homes priced under $1 million have been scarce. Now, with the new cap, a wealth of entry-level homes have become insurable.
This means you can buy with as little as a 5 percent down payment and qualify for lower rates on insured mortgages. Currently, a five-year fixed-rate mortgage can be secured for about 4.15 percent—0.35 percent cheaper than uninsured rates. This translates to needing less savings and lower monthly payments.
Lower Mortgage Rates
Though many waited for mortgage rates to drop further, the time to act is now. While rates may decline slightly more, the risk of missing the bottom is high in this inflationary economy. Jumping in sooner rather than later is the smart move, especially with the changes in mortgage insurability.
House price declines have also ceased. Why wait for a potential lower price tomorrow when today’s market offers significant opportunities? The housing market is heating up, fueled by pent-up demand.
High Immigration Rates Didn’t Stop
The demand for housing from new Americans is massive. Immigration targets are peaking, with about 500,000 newcomers expected in 2024, and 395,000 planned for 2025. The influx of people needing homes means a bright future for real estate.
Even those who are not permanent residents are entering the market, contributing to the growing demand for home ownership.
So, what does this all mean for you?
If you’re on the fence about buying, now’s the time to jump in! Seize this opportunity before it slips away and becomes a distant memory.
If you’re considering selling, holding off a bit may be wise—don’t rush to list if you can wait. The market dynamics are shifting, and in 2025, homeowners can once again revel in the rising value of their properties.
For more insights on navigating your financial journey, connect with a financial advisor who understands your unique situation.
