Logan Mohtashami on getting 11% home-price growth in 2025
Dec 5, 2024
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Logan Mohtashami, a lead analyst renowned for his deep insights into housing market trends, discusses the forecasted 11% rise in home prices for 2025. He explores factors like low inventory and rising equity that are shaping this prediction. The conversation dives into past trends influenced by COVID-19, affordability issues, and the implications of mortgage rates on buyer behavior. Mohtashami also emphasizes the correlation between the labor market and mortgage rates, revealing how economic stability could alter the housing landscape.
The forecast predicts a notable 10.8% increase in national home prices by 2025, driven by low inventory and high homeowner equity.
Despite current market volatility and high mortgage rates, demographic trends suggest increasing demand for housing could influence future price trajectories.
Deep dives
Home Price Growth Forecast for 2025
A prominent forecast anticipates a significant national home price increase of 10.8% by 2025. This outlook emphasizes that low total inventory levels and high nested equity among homeowners contribute to this predicted growth. Analysts note that the current housing market is characterized by historically low sales and inventory, which can drive prices upward, especially if demand increases. Such a forecast, while considered an outlier, aligns with patterns seen in past housing booms where low sales conditions can create rapid price growth.
Historical Context for Home Prices
Examining previous years, home price growth has shown volatility, particularly during significant economic events. For instance, before COVID-19, home prices were already increasing steadily, with rates spiking leading to expectations of declines. However, contrary to predictions, the market witnessed high growth rates in subsequent years, demonstrating that market behaviors can defy expectations. Continuous adjustments to forecasts highlight the challenges in predicting home price trajectories amid varying economic conditions.
Impact of Demographics and Demand
The demand for housing is closely linked to demographic trends, with current factors indicating a potential boost in purchasing activity. Despite elevated mortgage rates, recent increases in purchase applications suggest a shift in consumer behavior, driven by the employment rate and population dynamics. The sheer number of working individuals can create seasonal spikes in demand, even from historically low sales levels. This capacity for demand to rise amid economic fluctuations is essential for understanding future price movements in the housing market.
Models for Potential Price Declines
While some forecasts predict rising home prices, alternative models examine how prices could decline based on various economic factors. Potential scenarios include rising mortgage rates, increasing inventory, or distress among sellers, which could shift the supply-demand equilibrium adversely. Historical precedents indicate that price drops are exceedingly rare unless triggered by substantial market disruptions. Therefore, closely monitoring inventory trends and mortgage rates becomes crucial for accurately assessing future market conditions.
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about home-price forecasts for 2025, especially the one by the Apollo Group that has home prices rising by 10.8%.
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.