How 2024’s Housing Market Sets the Stage for 2025

A Conversation With Selma Hepp

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What Will a Second Trump Presidency Mean for U.S. Housing? 

Selma Hepp:

We have a lot of people out there wanting to buy homes if they can afford it. The issue is does the inventory continue to improve? Do we see more new construction? And does the macro environment enable us to continue to make inroads towards improvement towards some normalcy?

Maiclaire Bolton Smith:

Welcome back to Core Conversations: A CoreLogic Podcast where we tour the property market to investigate how economics, climate change, governmental policies and technology affect everyday life. I am your host MBS:, and I’m just as curious as you are about everything that happens in our industry. Believe it or not, 2024 is coming to an end, and so is our fourth season of core conversations this year. We’ve talked with industry leaders about a wide range of topics from climate change and population migration to AI to policy changes in the US that have affected property market professionals. And of course, we keep an eye on how the US economy affects the housing market. So to wrap up our season, we’re going to close with an in-depth conversation on the intersection of the economy and the property market. We’ll look at what happened in 2024 and what we can look forward to in 2025. And to dive into this, it should be no surprise that we’ve invited back one of our favorites, CoreLogic Chief Economist Selma Hepp Selma. Welcome back to Core Conversations.

SH:

I’m Maiclaire. Thanks so much for having me back.

Erika Stanley:

Before we get too far into this episode, I wanted to remind our listeners that we want to help you keep pace with the property market. To make it easy, we curate the latest insight and analysis for you on our social media where you can find us using the handle at CoreLogic on Facebook and LinkedIn or at CoreLogic Inc. On X and Instagram. But now let’s get back to Maiclaire and Selma.

MBS:

Okay. Well, here we are to dive into this crazy year that we have had. So I think the big story coming out of the US housing market this year without a doubt is interest rates. Can we talk a little bit about how interest rates affected the housing market across the year? Earlier in the year, we had record highs in recent memory before the Fed finally started cutting rates in September. So can you just talk through what this year looked like from how interest rates impacted the housing market?

SH:

Sure. Yeah. So well, we’ve been on definitely a roller coaster ride with mortgage rates this year. And I think it was the reason why the year was, as we called it a number of times throughout this year, a head fake. And the reason I say that is because we were expecting mortgage rates to be much lower or at least to trend lower throughout most of the year, where in fact, when we hit the peak for home pieing season in spring of this year, mortgage rates started reaching new highs. That’s where they were the second highest to what happened in fall of last year. And that really put a damper on the housing market when things started really shifting in terms of buyers interest, in terms of home price appreciation, in terms of even sellers sentiment. It really all changed after that spike in mortgage rates in April of this year.

And then that continued pretty much through August until the anticipation of the September rate cut started playing into the mortgage rate forecast and mortgage rates precipitous came down. And that really spurred a lot of optimism again. And we did see, especially in our markets, a lot of refi activity. We did see a little spike in pending sales, so buyers were back off the sidelines, but that really lasted for a really short period of time. And here we are today again at a new peak and it’s not clear that we will actually be seeing that decline this year that we were hoping for. After all,

MBS:

It’s really interesting how fast things changed, like this highly anticipated rate drop spurred some action and then we’re kind of back to where we were before that. So I guess Selma, what do we expect? What do we think is going to happen now? Do we expect interest rates to go lower at all? Do we think we’re going to stay where we are now and what’s the impact we think it’s going to have on affordability?

SH:

Yeah, so it’s very hard to forecast. Mortgage rates is evident from everything we’ve been through. I will tell you what I think it’s going to happen, and I think that what we are going to see is continued volatility and really that’s what this year has been about. It’s been about volatility. So now I think longer term or after we get away from the election, after everything is settled, we figured out what the next steps are. I think the mortgage rates are, or bonds actually, because mortgage rates really are priced off of bonds and bonds are the one that saw a surge in following or leading up to the election. And now given the outcome of the election, the issue really is that the bond market thinks that there’s going to be more debt spending, more deficit and also potentially more inflation given some of the rhetoric that the upcoming administration has had in terms of tariffs and immigration because both would put more pressure on prices.

So if that indeed happens, if do have more inflation, that means that the fed path of federal rate cut would be much slower than initially anticipated. And also that maybe long-term rates remain higher, so higher for a longer. I’m sure you’ve heard that throughout this year it’s been talked about. So that is a potential outcome out of the election. But again, I think longer terms, yes, rates do come down, it’s just the matter of how much and when does that happen, and I don’t think we see much change until the end of this year, maybe going into February of next year when things outlook is a little more clear.

MBS:

Sure, sure. Wow. Well, it’ll be interesting to keep an eye on it. Absolutely. I guess too, we talk a lot about affordability and can we maybe just put that in context, if we look back over the last even 25 years of where were we at the turn of this millennia into through the recession that happened in 2008, where are we with affordability compared to those two key benchmarks?

SH:

Right. So affordability is a really elusive term right now because it’s not just about home prices, it’s also again about mortgage rates and it’s about these insurance costs that we’ve been talking about and taxes as well.

And so at least when it comes to home price, part of the affordability measure, home prices are reaching every month we reach new highs. So home prices at the national level are at the highest that we’ve ever been.

ES:

Home prices are going up month over month on a national average, but that doesn’t mean that prices are changing equally in all markets. Learn more about home price growth in the US in CoreLogic’s home price index. The link is in the show notes.

SH:

Now, when you account for where mortgage rates are, when you look at actually where the mortgage payment is now, where it was historically or at least compared to those benchmark periods, we are somewhere where we were going into the great financial crisis. So that was one of the periods that we did see mortgage rates were slightly bit higher at that point, but home prices are now higher. And then you have to account also what’s happened with wages over time. And so you look at nominal home prices and then you look at real home prices, which is adjusting home prices for inflation. So in that sense, we are actually at the most unaffordable period that we’ve had for a really, really, really long time. And according to our forecast, even if mortgage rates do come down, some, we don’t get a lot of reprieve in terms of affordability simply because home prices have gone up so much over the last few years. And then on top of that, as I mentioned, we have other costs and these are variable costs that impact not only potential new home buyers or move up buyers, but all homeowners, which is insurance and property taxes.

MBS:

And I want to get into that, and actually maybe let’s go there now. First is to talk about taxes. We’ve talked about that a bit on this podcast this year as well too. Both property taxes and capital gains taxes on home sales have really ballooned as home prices have continued to grow up as well. So can you talk just a little bit about are we going to continue to see those tax trends increase as well in 2025?

SH:

Well, no, the short answer is no. And the reason is that property tax increases are directly proportional in most of the time to increases in home prices. And given that we’ve seen home price appreciation slow down considerably and even decline in some markets means that next year property tax bills are not going to go up as much. Well, in some markets, but not in others. In markets where home prices have not gone up or have gone down, you may actually see some reassessment there. So no, the bigger taxes at this moment will reflect what happened up until this point. But again, because home prices are expected to slow down will not be as big of a driver of lack of affordability as maybe insurance.

MBS:

Sure. Wow. Yeah. Again, another thing to keep an eye on. I guess if we go back to talking about interest rates too, we’ve talked on this podcast about the lock-in effect, and that’s simply a number of people have a very low interest rate because they refied when interest rates were at historically low rates. So because of that, people are staying in their homes and not wanting to buy. So I guess what do we think is going to happen with the lock-in effect as we go into 2025? Are people starting to want to maybe move or are people just sticking in those homes? What do we think is going to happen?

SH:

Yeah, that’s a great question because it really impacts how the housing market dynamics play out for us to have a balanced housing market. We know we already have a lot of pent up demand, but we know that the supply has been lacking, so we need supply to sort of start moving towards some level of normalization. And we are seeing that actually we are seeing that more people are putting their homes on the market. So now whether that’s a function of people just saying, okay, I need to move and rates are what they are, but I need to move. That’s one thing. The other thing is 40% of homes are owned free and clear. And so in that those situations, people don’t have a mortgage. And so the decision to put their home on the market is not impacted necessarily by what the prevailing rate is at the moment, although it may impact them if they’re buying a new home. But with all the equity that people have right now, especially baby boomers, they’re the wealthiest generation. They have accumulated the most equity in their home. They’re most likely to be cash buyers on the other side, which means, again, that they may not be impacted by mortgage rates.

MBS:

They’re not influenced by it.

SH:

Right. And the other thing is too, there’s a lot of second homes that were bought during the pandemic. There was a lot of investor homes that were bought

Over the last few years, and we are seeing a little bit more of that inventory become available because holding on potentially to these properties maybe too expensive or whatnot. So inventory situation is certainly improving. But then there is a bifurcation again, when you look at that part of the housing market, because in areas where there’s a bit more concern around affordability or affordability lacking, you will see larger increases in inventory. Also, maybe if there’s been more new construction in some of the markets, you’ll see overall more inventory in the housing market. And so when I mentioned these two things, I’m particularly talking about markets in Texas and Florida where we’ve seen the largest increases in inventory. But let me just talk about California for example real quick because that’s an interesting market that we’re really, really worried about being the most locked in market. And now over the last six to eight months, we’ve really seen actually a lot of unlocking in this market and more inventory out there. And that’s maybe not something that’s maybe not something we were expecting coming into this year. So I’m really much more optimistic about the inventory availability next year

Given the trends we’ve seen so far.

MBS:

Well, definitely something we’ll keep an eye on because that is interesting to see how it’s changing in places that we maybe didn’t anticipate it changing.

ES:

It’s that time again, grab a cup of coffee or your favorite beverage, we’re going to do the numbers in the housing market. Here’s what you need to know. Inflation continues to pressure people looking to buy homes. We’ve talked about it all. However, inflation also affects renters and not everyone bears the burden of higher prices equally. So where has inflation hit the hardest? Look at where rents have increased the most. In the US inflation has been the heaviest. In the South Miami, Atlanta, Dallas and Tampa are all showing inflation above 25%. However, when compared to other cities in the south, Houston is doing well. The Texas city saw 21% inflation, which is closer to the national average as of June, 2024. Average prices as measured by the consumer price index are up 22% for the decade, and that’s the sit, see you next time.

MBS:

I guess the other side of it too is when we think of those people that are staying in their homes, and particularly those that have the higher interest rates, are we anticipating a wave of refinancing? I mean, I’m sure those lenders out there that are listening, they’re really curious to hear how big that wave may be.

SH:

And like I mentioned earlier, we’ve already seen signs of that when mortgage rates dropped in August and early September. We do have a pretty significant pipeline of mortgages that were originated over the last couple of years where mortgage rates that people bought it is higher than potentially what would be as we go through 2025. And so there is a pipeline when mortgage rates did drop to 6%, I think we estimated anywhere between three and 4 million of potential refis that could be happening as a result, or were originated above the 6% mortgage rates. So they were potential for refi. So yeah, I think the refi market is enough for a better year next year.

MBS:

Yeah, wow. Again, to be seen what it’s going to look like. I know that that one is this top on everybody’s minds potentially including you and I, who have these high interest rates because you and I have talked about how we’ve bought homes during these higher interest rate time periods. So yeah, it’ll be

One that’s close to home for us as well. You mentioned boomers, how they are the wealthiest generation. Many of them no longer have mortgages. They had a lot of equity in their homes. I want to look at the opposite end of that spectrum and the youngest generation buying homes now Gen Z. So in a very different situation, boomers, when they bought their homes, it was a very different time. Home values, home prices were a lot less and they gained a lot of equity in their homes. This younger generation is now buying a home when the price and the value of these homes is skyrocketing, it’s super high, they’re also coming in. So they’ve got these high down payments, rising costs of property taxes, property costs, also debt to income ratios are incredibly high because many of them are paying down student loan debt. So it’s a very different situation than potentially previous generations have been in when they’ve gotten into the housing market.

So one thing that I think is really interesting is I’ve heard examples of people are getting creative on how they buy homes. I actually have an example of good friends of ours that have, they pooled resources together with friends and are, they have two families that bought a six bedroom, 3000 square foot home together, and one family’s living in the upstairs and one family’s living in the downstairs just to make it more affordable for them to own a home and get in and start gaining some equity. So I guess, do we expect these interesting creative solutions to continue? Do we anticipate it getting easier for Gen Z or is it going to just continue to get harder?

SH:

That’s a great question. So let’s unpack a little bit of it. I think this co-living it is an interesting concept and I think it probably will gain traction in some markets because you have to remember that not everywhere median home prices is a million dollars. In California, it’s

MBS:

Where you and I live. It is,

SH:

Right, right. There are many, many markets outside the major coastal markets where home prices are actually, they have gone up, but they are still relatively more affordable and a dual income salary can’t afford those homes. I think sometimes our perception gets clouded by the fact that our markets where one lives is in a certain way, and so we think all the markets are that way, but again, there are markets that are more affordable. I mean, I have a friend who bought in Cincinnati all by herself because she could, and it’s more affordable. So it just really depends where you are. But that aside, I think people are trying to be more creative, and I think that’s why it’s important for new construction activity to also be as creative in terms of providing different options. So I sort of have a similar situation where I bought a duplex and I live on one side and I rent the other side, and I do that so I can actually afford the house that I live in, otherwise I would not be able to afford it. And so providing more of these options to me in some of these very, very expensive market would be a way of allowing people to enter home ownership.

Now, is that really happening? It’s very slow moving trend we’ve seen, and I think also actually one that I don’t know how it’s going to play out in the new world that starts next year because you have to have some zoning changes.

But the other thing that I was going to mention in terms of not just being creative is also equity share. Where there are many companies, or a number of companies I’ve recently heard of that are helping people with down payments so that they can actually buy a home. But then there is shared equity. If the home gets sold, they get part of the equity. Oh, interesting. So there are many creative ways now that, especially with affordability being as challenged as it is, I think we get all more creative when one is pushed to a corner, you get more creative about how to find a solution. So there are many things out there, but we’ll see what happens. Yeah,

MBS:

Yeah. It’s so interesting to see just how the steps people take to try and buy a home and what they can do. I guess the other thing hot on everyone’s mind is I do want to touch on the presidential election. Election years period are always known to affect the housing market. So we kind of unpacked the 2024 election immediately following it with our colleague Jay Halbert. But I guess from your perspective, Selma, if we kind of look big picture, did we see that the election had an impact on even before, regardless of the outcome, just the leading up to the election and then potentially the outcome as well. Did we see it having an effect on the housing industry? And I guess do we expect any changes with the new administration as well when we look at the economy and the housing market

ES:

Before Selma gets into how the presidential election could affect the housing market? I wanted to let you know there is a whole core conversations episode on this subject that aired on November 13th. The link is in the show notes.

SH:

Yeah, so I think leading up to it, there was certainly a lot of anticipation or discussion around potentially people holding back waiting to see what the outcome is. But we can’t really quantify that in the data because there’s so many things happening in the housing market that it’s hard to tell this is exactly the impact of the election versus what is the impact of higher mortgage rates versus what is the impact of job market or anything else that impacts the housing market. We do tend to see a little bit more of an impact holding pattern in a higher end of the market because there is some tax repercussions,

MBS:

Especially

SH:

Given this election, but generally there’s sort of different views on what happens with tax implications. So there could have been a little bit of that going on, but I think again, the housing market, to me it was slowing down mostly as a result of higher rates than anything else. And then just lack of affordability.

But it was interesting to see the surge in mortgage rates following on August drop. We talked about that, and that volatility I think was definitely poured cold water on potential home buyers. And I think we, thinking ahead, I think again, I said that earlier that I think we will see a little bit more volatility continuing in terms of mortgage rates going forward. And so that may be keeping some people on the sidelines. So that’s one thing. The other one is there are outcomes that can have a positive impact on prices or affordability, and there are things that can have negative impact. And I am not sure at this point which ones outweighs the other. To give you an example for with tariffs and immigration, we are concerned about higher construction costs, and those two have already been a concern for a number of years now because we lack labor construction sector also because of the pandemic, we saw so much volatility in terms of construction materials.

And so if you add tariffs to that, there’s concern that construction costs may go up. On the flip side, the new administration has talked about opening federal lands for development, which can lower the cost of land. And cost of land has been a growing concern for developers because it has gone up so rapidly, even more rapidly than labor or materials. So you have these opposing impacts that could either drive the cost of housing up or down. So there’s a lot of uncertainty there. Then there’s uncertainty around how did deregulation around financial services impact cost of mortgage originations? Then you have the GSC reform, what does that mean for cost of mortgages for new buyers, younger buyers or lower income buyers? So there’s a lot there a lot.

ES:

Before we end this episode, let’s take a break and talk about what’s happening in the world of natural disasters. CoreLogic’s hazard HQ command central reports on natural catastrophes and extreme weather events across the world. A link to their coverage is in the show notes. October brought two major hurricanes, hurricane Helene and Hurricane Milton. Hurricane Helene brought heavy rain and hurricane force winds to large portions of the southeast. The heavy rainfall caused catastrophic river and flooding in the mountainous regions of Western North Carolina, CoreLogic estimated insured wind and flood losses to be between 10.5 billion and 17.5 billion. Uninsured losses are estimated at between 20 billion and $30 billion, highlighting the growing insurance gap problem in the us, especially with regards to flooding. Just days later, hurricane Milton brought devastating damage to Florida CoreLogic estimated insured wind and flood losses from Hurricane Milton will be between 17,000,000,020 $8 billion.

MBS:

Okay. Selma, as we go into 2025, I would like you to pull out your crystal ball and tell me what do we need to keep our eyes on? What trends do we think are going to continue? What are things that we think we’re going to stand out? What can we expect in 2025?

SH:

Well, I haven’t cleaned my crystal ball in a while. It’s a little murky. I think what we do know is that we had a huge shock during the pandemic, and we are trying to find our way out of that situation and find some level of normalcy. And what is unclear yet is what the new normal looks like. But what we do know is that we have a lot of people out there wanting to buy homes if they can afford it. Our population growth, our household growth still is very much in favor of needing homes, and we know that we are continue to be undersupplied. So when I think about the demand side of things, I don’t see that there is a concern with the demand. The issue is does the inventory continue to improve? Do we see more new construction? And does the macro environment enable us to continue to have, make inroads towards improvement towards some normalcy? And by macroeconomic environment, I mean, what happens with mortgage rates? Again, mortgage rates do govern the housing market, especially now with affordability being so low. Do we have strong economic conditions to where people continue to be employed and are able to then buy a home? Right? Because if you have job losses, that’s first way where you lose demand is when you people are losing their jobs. They can’t then by extension, they cannot continue to afford their current mortgage and they may end up in delinquencies. So strong economic conditions are very important for us to continue to see improvement in the housing market. But what is positive is that existing homeowners do have a lot of equity, so they have a financial buffer in case there is some sort of economic slowdown. And if they lose the jobs themselves, they can tap into that equity. And so that’s really positive and very different from some previous periods of economic slowdowns.

MBS:

Well, I know we will all be waiting to see how things unfold, and before we get to 2026, we’re going to get you to clean your crystal ball so that we can make sure we’re continuing to look into it moving forward. So Selma, as always, it’s been so great to have you today. Thank you for joining me on Core Conversations, the CoreLogic podcast, and you will definitely be back again in season five.

SH:

Thank you. Thank you Maiclaire so much for having me again.

MBS:

And thank you for listening. I hope you’ve enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life producer Jessi Devenyns, editor and sound engineer, Romie Aromin, our Facts Guru, Erika Stanley and social media duo, Sarah Buck and Makaila Brooks. Join us next year for season five for another Core Conversation.

ES:

You still there? Well, thanks for sticking around. Are you curious to know a little bit more about our guest today? Well, Selma Hepp is CoreLogic’s Chief Economist. Selma leads the economics team, which is responsible for analyzing, interpreting, and forecasting housing and economic trends in real estate, mortgage and insurance. Selma frequently appears on local and national radio and television programs and has been widely quoted in the Wall Street Journal, the New York Times, and many industry trade publications. She also regularly contributes to the CoreLogic Intelligence blog where you can read her work at corelogic.com/intelligence.

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