Happy New Year! Much has changed over the past 12 months and last week we revisited my predictions for 2024…..some hits and some misses, but isn’t that the way it always goes. This week we are going to look through the windshield at what I see coming for 2025. Let me also say that there are no guarantees that any of this will or will not happen, but here is my best stab at what I “think” might happen….plus its fun!
1. This is a repeat of 2024…but one everybody always wants to know……Prices will at a minimum hold strong, but likely will continue to increase!
As always, pricing is a direct result of supply and demand economics. 2024 proved that current home owners were very hesitant to ditch their 3% home mortgages and 2025 will be no different. Thus, I predict that home prices will inch up 4% in 2025. This may seem low, but keep in mind it still falls on the lower end of historical year over year appreciation averages. On the other hand, several national “experts” have raised concerns over the potential for drastically reduced pricing, however, I am not worried about that at all. With the nationwide housing shortage I don’t see drastically falling prices anytime in the near future. If anything we might be staring down the barrel of 2-3 years of lower than desired home appreciation.
2. Interest rates may vary wildly, but will average in the mid 6% range for the year.
With current interest rates at or slightly above 7% affordability is center stage for home buyers and I expect that to continue through 2025! In simple terms, the cure for housing is the same as the disease…..interest rates. If interest rates were to dramatically decrease it would just cause another pricing boom. Whatever would be saved in lower rates would be eaten up by increased home prices. I hate to say it, but interest rates in the 6% range are probably what is healthiest for the overall housing market in the long run…..expect rates to be in the low to mid 6% range through 2025 at least. REMEMBER…..the FED is ALWAYS late.
3. 2025 will be what I call the year of “acceptance”.
By the year of “acceptance” I mean that buyers and sellers alike will accept that 2%, 3% and even 4% interest rates are not coming back anytime soon and by accepting this they will really start to move on with their lives and accept what is now the new normal. Waiting really is the hardest part and people will only put their lives on hold for so long once they accept that they are likely waiting in vain.
4. Inventory levels will remain tight……but will continue to inch up little by little.
With the “year of acceptance” a few more sellers will get off the sidelines and get in the game, but the lion’s share of inventory will still be triggered by “life events” that require relocation. One other factor that has played more and more of a role the past two years is cost of living. As the cost of living continues to increase in Colorado, we do have sellers who have decided to move to less expensive states where they can get more house for their money and their daily dollar goes further. For reference we averaged 526 active properties per month in 2024……which was still 30% lower than 2019 (pre-pandemic) when we averaged 736!
5. The number of sales will remain relatively flat.
In 2024 there were 2586 total sales which was only 60 more total sales than in 2023. I expect 2025 to be much the same. The bottom line is, unless something significant changes there is little reason to believe anything will significantly shift. Baring a “black swan” financial event I don’t expect any substantial swings up or down.
6. The Avalanche will reach the Stanley Cup Finals, Western Colorado will remain one of the best places to live on the planet and last but not least The City of Grand Junction will come to their senses and remove those heinous white poles and ridiculous parking along 3rd, 4th, and 5th streets.
One of these is a stretch, one is for sure and the other should happen for sure, but will not happen simply because it makes sense and everybody agrees…..thus making it impossible to happen.
I have fun with these predictions, although 2024 proved I am not very good at them. I honestly feel very good about my 2025 predictions and eagerly await to pen the results in 2026. I am still searching for somewhere better than Western Colorado….so if you find it….let me know. Until next year, be thankful for what you have because someone always has it worse and almost all of our problems are first world problems! Savor 2025…I know I will.