Hi All - Happy Tuesday. It’s the last day of the month (and year!), which means it’s time for the Last Cast Letter.

I hope everyone is having a wonderful holiday season with family and friends. Before we dive into today’s edition, I want to say a quick thank you for subscribing to this newsletter.

I published the first edition this past January so we’re approaching the one-year mark. Next month I’ll share how much we’ve grown and my plans for the new year.

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25 Predictions for the Real Estate Market in 2025

I thought we would end the year with a round-up of 25 predictions for 2025. I always enjoy these things and the full articles are worth a read. If you don’t have the time, here are the main takeaways from the 25 points below:

• Interest rates: Declining gradually but remaining above 6%, influencing affordability and buyer behavior.

• Housing supply: Inventory constraints persist, with new construction partially alleviating shortages.

• Regional trends: Markets like Miami, Dallas-Fort Worth, and Houston lead growth.

• Technology adoption: AI, virtual tours, and digital tools reshape real estate transactions and marketing.

• Market stabilization: Recovery signals in commercial real estate and overall market stabilization create opportunities for buyers and sellers.

1) National Association of Realtors® (NAR): NAR's Chief Economist, Lawrence Yun, forecasts a 9% increase in home sales for 2025, followed by a 13% rise in 2026. He anticipates mortgage rates stabilizing around 6%, with median home prices increasing by 2% in both years. Yun suggests that the housing inventory shortage may be easing, offering a more favorable environment for buyers and sellers. Keep reading.

2) Zillow: Home values nationally are forecast to grow by 2.6% — a softening that would be welcome news for financially stressed buyers. The forecast is based on the assumption that interest rates will stay around 6.5%, and that more sellers will list their homes for sale. Zillow forecasts 4.3 million sales of existing homes in 2025, up slightly from the 4 million expected to sell in 2024. Hartford, CT, Providence, RI, and Miami Florida are the top 3 metros where home values are expected to increase the most in 2025, according to Zillow. Keep reading.

3) Urban Land Institute: A report identifies Dallas-Fort Worth, Miami, and Houston as top markets to watch. The report anticipates lower interest rates reducing borrowing costs, aiding in price discovery, and encouraging an uptick in commercial real estate transactions. Keep reading.

4) Goldman Sachs: Analysts at Goldman Sachs have increased their forecast for U.S. home price appreciation to 4.5% for 2024 and 4.4% for 2025, up from previous estimates. They attribute this to strong demand and limited supply, suggesting that homes might become more affordable even as prices continue to climb. Keep reading.

5) Freddie Mac: “We expect mortgage rates to decline over 2025, but very gradually. Declining rates will boost home sales to a slightly higher level than what we saw in 2024. Interest rate lock-in remains a major challenge for the housing market. House price growth may continue to moderate given increased supply and declining but still high mortgage rates. This modest growth in house prices, and the increase in home sales should support the purchase market in 2025. We also expect refinance volumes to increase mainly based on declining mortgage rates.” Keep reading.

6) Fannie Mae: “As part of its latest outlook, Fannie Mae’s economists shared five predictions for the housing market in 2025. They expect: Average mortgage rates will decline modestly but remain above 6 percent, with likely bouts of volatility. Existing home sales will remain near 30-year lows, but location matters. New home sales will remain a bright spot in the housing market (where they can be built). National home price growth will decelerate. Multifamily housing will remain in a holding pattern.” Keep reading.

7) JPMorgan Asset Management (As it relates to rates): “10-year US Treasury Yield trades in a range of 75bps or less: The new fiscal regime in the US has investors braced for another year of high interest rate volatility in 2025. So far in 2024, the 10-year US Treasury has traded in a range of over 100bps. Meanwhile in 2023 and 2022, the 10-year US Treasury traded in a ~150bps and ~250bps range, respectively, as the Federal Reserve (Fed) roiled the bond market with an aggressive rate hiking cycle after letting themselves get too far behind the inflation curve. Next year, the Fed may actually find itself at the right policy setting without having to do much at all! The last time the range was less than 75bps was in 2017 when the Fed was hiking at glacial pace and inflation was stable. Today, the Fed has eased 100bps already, taking the edge off the economy, but policy remains restrictive enough to counter any fiscal impulse. Meanwhile, with so much cash on the sidelines, we expect captive buyers to jump in on any meaningful backup.” Keep reading.

8) Realtor: “New multifamily supply will remain a key factor shaping the rental market in 2025. In the third quarter of 2024, the annual pace of newly completed multifamily homes reached 658,000 units, pushing the rental vacancy rate up to 6.9%. While this uptick indicates that recent rental supply has outpaced demand, it's important to consider the broader context. While the rental vacancy rate is at its highest level since the start of the COVID-19 pandemic, it remains somewhat below the 7.2% average seen from 2013 to 2019. Looking ahead, a robust multifamily construction pipeline is expected to continue driving rental supply growth in 2025, which is likely to push the vacancy rate back toward its long-term average.” Keep reading.

9) Bankrate: Would-be homebuyers continue to be discouraged by elevated mortgage rates and rising home prices. In addition, while housing inventory has grown, it’s still below what’s needed for a balanced market. All three issues show signs of improving slightly in the coming year, but experts still expect 2025 to be a challenging one for the U.S. housing market. Keep reading.

10) Norada Real Estate Investments: Home prices are predicted to rise moderately, with experts forecasting increases ranging from 0.5% to 4.4%. The housing inventory is expected to remain constrained, affecting overall market activity. After a tumultuous period, the market is anticipated to stabilize, offering opportunities for both buyers and sellers. Interest rates will continue to play a significant role in shaping buyer behavior and housing affordability. Keep reading.

11) Ramsey Solutions: Interest rates should continue to decrease in 2025. A housing market crash is not on the horizon. Housing inventory will likely still be low in 2025, and demand could increase. If you’re financially ready to buy now, don’t wait. Keep reading.

12) Home Buying Institute: forecasts suggest that most real estate markets across the U.S. will continue to favor sellers rather than buyers in 2025. The main reason for this: low inventory levels. Yes, the real estate market is moving at a slower pace these days. And yes, home price growth has slowed considerably—and even flattened in many U.S. cities. But even so, persistent supply shortages will give sellers the upper hand in most cities. Keep reading.

13) MarketWatch: Mortgage rates are expected to stay over 6% well into next year. Home prices are expected to keep rising next year, albeit at a slightly slower pace. Home buyers could see more for-sale listings next year. Home buyers can expect builders to continue offering sales incentives to make homeownership more affordable. Homeowners’ insurance premiums are expected to continue rising next year. Rent prices are expected to stay stable next year. Keep reading.

14) ProspectPlus: Remote work will continue influencing buyer preferences in 2025. Homes with office spaces, outdoor areas, and proximity to suburban or rural environments will remain in demand. The real estate industry will continue to see a rapid adoption of technology. AI-driven tools will help streamline tasks such as lead generation, property recommendations, and client communication. Virtual tours and augmented reality will become the standard for property viewings, making it easier for agents to close deals remotely and expand their market reach. Keep reading.

15) Reuters: U.S. home prices will rise a bit faster this year than previously expected due to limited available supply, according to analysts polled by Reuters, who saw affordable properties coming to market remaining below levels of demand in coming years. Home price rises are expected to slow to 3.3% in 2025 and 3.4% in 2026, the latest survey showed, despite more than 200 basis points of interest-rate cuts expected by then. Keep reading.

16) Deloitte: Results from Deloitte’s 2025 commercial real estate outlook survey give some indication that commercial real estate owners and investors are hopeful that 2025 will emerge as a year of potential recovery over two years of muted revenues and pullbacks in spending. After two consecutive years where most survey respondents expected revenue declines, 88% of global respondents now report they expect their company’s revenues to increase going forward, a substantial shift from the 60% who expected further declines last year. Moreover, 60% of respondents expect growth to be in excess of 5% year over year. While their companies may be coming off muted baseline financial performances across the real estate industry last year, the turn in revenue sentiment could indicate that global real estate executives expect better prospects ahead. Keep reading.

17) Barron’s: Helped by the favorable environment, REITs could return 10% to 15% in 2025, according to a note from Citigroup. While Citi warns there could be a wide variation in returns among individual REITs, that beats the firm’s forecast for an 8% return for the broader S&P 500 next year. Specifically, residential and healthcare REITs stand to gain from demographic trends that could drive demand for years to come. Citi is bullish on 5 REITS specifically: AMH, SUI, OHI, VTR, and EGP. Keep reading.

18) HousingWire: HousingWire Lead Analyst Logan Mohtashami and Altos Research Founder Mike Simonsen have compiled a comprehensive forecast for the 2025 housing market. The report offers hope that next year will be better than the last, but only to an extent. The pair project 4.2 million in existing home sales in 2025. This is a 5% increase over 2024, which is on pace for 4 million transactions, a number that would represent the fewest home sales since the housing bubble burst in 2008. Keep reading.

19) The Counselors of Real Estate: Political uncertainty is the leading concern for top commercial and multifamily real estate advisors as 2025 approaches—but it has a lot of competition. In addition to political uncertainty, the real estate industry also faces $1.8 trillion in commercial real estate debt set to mature before 2026; $380 billion in economic losses in 2023 due to extreme weather; soaring insurance costs; and persistent, still-elevated interest rates. On the bright side, interest-rate induced bleeding has slowed as deal volume has begun to stabilize heading into 2025. Keep reading.

20) US News & World Report: Sales of existing homes will grow moderately as buyers become accustomed to higher prices and mortgage rates, but transactions could surge if rates decline. New policies on real estate commissions and the sharing of home listings on public MLS systems will likely vary between regions before revamped national rules are enforced. Newly built homes will continue to fill in the supply gaps created by the lack of existing home inventory, especially by homebuilders who can buy down mortgage rates. Mortgage rates will likely range from about 6% to 7% unless there is a recession, but short-term lending rates will continue falling through 2026. Keep Reading.

21) Motley Fool: Mortgage rates are already falling and will likely drop further in 2025. Experts predict that home prices will continue to rise, albeit at a slower rate. The affordability crisis will ease a little, though first-time buyers still face an uphill battle. Keep Reading.

22) CBRE: Despite many uncertainties, the U.S. economy is poised for growth in 2025, driven by consumer spending, easing financial conditions and productivity gains. While retail and data centers have been supported by longer-term trends, all other real estate sectors will see the start of a new cycle. Economic growth and firming real estate fundamentals will drive a moderate recovery in real estate investment activity in 2025, even though the 10-year Treasury yield will remain above 4%. Capitalization rates will compress slightly. Investors have the opportunity to secure long-term returns that have not been available for many years. Keep reading.

23) CNBC / Redfin: The median asking price for a home in the U.S. will likely rise 4% over the course of 2025, a pace similar to that of the second half of this year, according to Redfin. At a national level, the median asking rent price in the U.S. will likely stay flat over the course of a year in 2025, as new rental inventory becomes available. The risk of extreme weather and natural disasters may anchor down home prices or slow down price growth in areas like coastal Florida, California, and parts of Texas, which are at high risk of hurricanes, wildfires, or other disasters. Keep reading.

24) New York Times: Several states and cities have passed legislation to spur residential development, which is critical because most building rules are set at the local level. President-elect Donald J. Trump has called for loosening regulations, which could make it easier to build, and for opening federal land to housing construction. But the second Trump administration might create its own headwinds. Trade tariffs could increase the costs of some building materials, like Canadian lumber, and spur inflation, driving up interest rates again. Mass deportations could increase labor costs, since an estimated 30 percent of construction workers are immigrants. Keep Reading.

25) GlobeSt: More than 10% of CMBS loans on office buildings are delinquent. A lot of real estate owners have borrowed using short-term debt using interest-only payments with a large balloon payment at the end. Those who went that route, particularly with adjustable-interest loans that were made within the last few years, are likely feeling the heat. There is only so far that lenders will kick the can down the road and increased borrowing costs lead to lower valuations. Keep reading.

As always, if you’re interested in investing alongside us, fill out the form below.

— Brooks