An Unexpected Start to the Year
March 7, 2025
Market Trends Newsletter
March 7, 2025
Market Trends Newsletter
Volume 1: Issue 002 | Read Time: 3 minutes
Happy Friday!
It was great to hear from so many of you last month!
As I mentioned in our kick-off email, my goal is to provide you with relevant information and perspective about our housing market so you can make the best decisions possible when the time comes. With that, I’m excited to bring you the second edition of our monthly Market Trends.
While it’s still difficult to get a read on the direction our local housing markets are headed this year, there are a few bright spots starting to emerge.
The cost of financing has been the dominant force impacting our housing market for the past 18 months. Most people writing about rates seem to like mentioning that they’re currently in-line with the long-term average. It’s a great sound bite but, in my opinion, it glosses over the real issue. Interest rates are a challenge because they’re exacerbating historically high housing costs. The real challenge isn’t simply rates, it’s overall affordability.
As recently as twenty years ago, the cost of a single-family home was roughly three times the median annual salary. Today we’re looking at it being closer to seven times the median and in some areas, well above that.
All markets correct eventually, and we’ve been due for a correction since 2022. In the last year, decreased demand has softened housing prices in most areas. Now, in just the past week, uncertainty about the shifting economic outlook has finally found its way into the bond market and consequently started to push mortgage rates lower, driving them under 7% for the first time since last fall.
Assuming rates continue to improve, we should see it becoming easier for people who want to move, instead of needing to move, to do so.
I’d be remiss not to tip my hat to the influence of seasonality on our market since the beginning of the year which definitely kicked in right on schedule near the end of January and continued to ramp up through February.
The key difference this year is that the numbers are pointing to a more active spring than last year with a 15% increase in new listings. The good news is that we’re not just adding to stagnant inventory – buyer activity is also starting out stronger with 12% more homes going under contract in the past 60 days than over the same time period last year.
These year-over-changes are important to keep an eye on because they tend to signal what to expect over the next few months. More activity generally means more opportunity and a healthier market for buyers, sellers, and homeowners alike.
It will be interesting to see how these trends continue to develop in the coming months and what new trends arise as we get into the spring season!
As I said last month, one of my convictions about real estate is that there is always opportunity somewhere in the market. The challenge is identifying them, and taking advantage of them, before they become common knowledge.
“Moving-up” to me includes two common scenarios – you want to move into a larger home that’s a better lifestyle fit, or you want to move into a more expensive home (this could be due to size, location, condition, or a combination of things).
Inventory in higher price ranges of $700K and above is still elevated with many homes sitting on the market for extended times. This is leading to more negotiating room on price and more sellers being willing to consider a contract that’s conditional on the buyer selling their current home.
If you have a more affordable home to sell in a range where buyer activity is picking up, it’s easier now than it usually is to concurrently sell your existing home and “move-up”. If you are thinking about keeping your current home as an investment property and moving up, this could also be a great time to make the transition.
Builders have felt the pressure of interest rates and high prices as well and have had to start finding creative ways to entice buyers to buy. Since building costs are still elevated and margins are tight, new home prices continue to be more expensive than the median resale prices in many areas.
Many builders are responding by negotiating steeply discounted introductory interest rates with their preferred lenders. Getting a rate in the 4% range for the first year, or getting a permanent rate buy-down over time, can make a big difference and might be worth taking advantage of.
Commonly know as “kiddie condos”, these are properties typically purchased as an investment for a family member to live in while attending college. Some investors also strategically target university areas due to the near constant supply of tenants.
This is the time of year when pre-leasing for the fall semester is beginning so if this is on your radar for 2025 or 2026 it may be worth a conversation.
As always, if you’re happy where you are, that’s truly the best-case scenario. I’m here to help if and when that changes.
Until next month, be safe, and be well,
Scott