Housing Economic Outlook and How It Impacts Homebuyers

Housing Economic Outlook and how it impacts Homebuyers (Updated January 26, 2025)

Introduction

Housing Economic Outlook: Market activity at the regional level continues to be very active and attended to owing to constant shifts in the economy, changes in population, and an increase in new laws and rules being passed. This updated Housing Economic Outlook considers the changes taking place in 2025 and their effect on home buyers while maintaining the original outlook. On August 14, 2028, the blog performs as an archival piece.

Housing Economic Outlook for Home Buyers in 2025

Key Economic Trends

Housing Economic Outlook: Old Age, Inheritance, and Value Change

The role of baby boomers in the housing economy remains decisive. While many are now retiring, some are choosing to downsize, while others are redefining ‘aging in place,’ hence diminishing inventory in certain categories.

An economic phenomenon theorized by Ben Graham states that outflows from the stock market towards more secure investment classes such as bonds have muted mortgage rates, which increased, at least in the context of the new Federal Reserve rates improving the issue.

Housing Economic Outlook Interest Rates And Inflation

In 2025, mortgage rates are hovering at six percent, while recent spikes caused by efforts to counter inflation have seen rates peak. Increased pending home buying demand is decreasing, and inflation will continuously negatively affect home building costs.

Housing construction costs continue to rise in various parts of the country due to inflationary issues. However, this time, the degree to which these home prices are being elevated and additional construction costs have drastically reduced.

Housing Economic Outlook: Global Economic Influences

The slowdown of China’s economy has a ripple effect on global trade and investments. While the yuan devaluation is lessening the ability to compete in exports, it has also helped reduce global inflationary pressure, making housing markets more stable.

Housing Economic Outlook on Mortgages

Fannie Mae and Freddie Mac Guidelines

Fannie Mae and Freddie Mac have changed their policies to make buying homes easier for more people. The new policies include removing caps on debt-to-income (DTI) ratios and accepting alternative credit sources, including rent and utility payments.

Down Payment Assistance Programs

Federal and state programs like the Illinois Housing Development Authority (IHDA) are still providing first-time home buyers with grants and loans with low interest rates for down payments and closing costs.

Adjustable-Rate Mortgages (ARMs)

Due to the expensive rates offered by fixed mortgages, ARMs have become increasingly popular. Buyers expecting to stay in the property for a shorter tenure are using ARMs to obtain lower rates initially, with the option to refinance later on should rates improve.

Increased Scrutiny on Borrowers

There remains a strong focus on compliance on the part of lenders. The borrowers must now be responsible for making sure that they:

• Well, document any sizeable deposits made.
• Adhere to the guidelines on gifted money.
• Restrict recent usage of credit cards.
• Provide evidence of rent payment through checks or bank transactions.

Shifts in the Market for Real Estate in the Far-Off Future of 2025

Supply and Demand

Even though there has been an increase in new construction, it still fails to address the high demand for housing in quickly expanding areas. The inventory of houses available is extremely low, especially for new people entering the market. Although competing offers have become less frequent since the height of 2022, there is still competition for real estate in sought-after places.

Affordability Challenges

First-time buyers are still struggling due to high selling prices and increased borrowing costs. To make these purchases, thumb-down assistance programs alongside creative financing approaches are imperative.

Housing Economic Outlook: Rental Market Trends

Increased rental rates have made homeownership a more appealing option for some people. Unfortunately, for many prospective buyers, high rental prices make saving up for a down payment difficult.

New Top Tips for Home Purchasers in 2025

Start Early Preparation

Start by putting away enough money for a down payment while at the same time improving your credit score. A score above 700 will greatly improve your chances of obtaining loans with low interest rates.  While obtaining a mortgage, avoid taking on new debt and ensure that all income is well documented.

Check Out Aid Programs

Check out the local or state programs that provide tax credits to first-time buyers through grants and low-interest loans.

Work With People You Can Trust

Consult with licensed mortgage experts and knowledgeable real estate agents who are familiar with the most recent market changes and can assist.

Think about Flexibility with Location

Discover new hotspots. Emerging suburbs and smaller cities usually come at lower prices while not compromising essentials.

Prepare for the Future

If the rates are too high, concentrate on making affordable decisions now and refinancing later. Look for houses that will best accommodate you in the next 5-10 years.

To Sum Up

The challenges of affordability and inventory remain unsolved. Still, 2025 is marked with stability in the housing market after a period of volatility. Home buyers must stay smart and strategic, as using available tools and resources is the norm to cope with the changing market. Financing, other assistance programs, and working alongside experts make it a little easier for buyers to remain active participants in today’s housing market.

This revised blog is intended to serve readers with updated trends and insights. For those looking for a different angle, September 10, 2018, provided a historically significant blog that is preserved for their reference.

Below is the original blog Housing Economic Outlook from September 10, 2018: Archieved:

This BLOG On Housing Economic Outlook And How It Will Impact Home Buyers was written and published on September 10th, 2018

Housing Economic Outlook for Homebuyers: 2018 is projected to be the year when the biggest number of boomers hit age 59, which is the mandatory minimum age for when distributions can begin on retirement accounts such as IRA’s. What does this mean for the stock market and the housing economic Outlook?  Well, a large systematic withdrawal of equity funds can mean a slight correction in the large indices, such as the Dow Jones Industrial Averages and the S&P. Could also spur a natural progression from equities to the bond market, since they are seen as a safer investment for retirees. What this means is that investors will be transferring their money from the stock market and investing it into the bond market. This will lower yields for the short term and, hence, lower interest rates as a result. Dale Elenteny of Gustan Cho Associates says the following about the housing economic outlook:

Although the Federal Reserve Board  raised interest rates by a quarter percent recently, all economic signs still point to a relatively low inflationary environment. Social security has said no benefit increase for 2018, and salaries are not increasing at the pace economist would hope for

China has devalued their yuan. This is a sign their economy is not growing. They need foreign money to purchase their exports, which, when priced higher, seem less attractive due to the substandard quality of the inventory. In this article, we will discuss and cover the economic outlook and how it will affect homebuyers.

Housing Economic Outlook On Mortgages

Fannie Mae has loosened their mortgage lending guidelines to allow a primary wage earner’s credit score to be used for qualifying and pricing, provided he or she makes 55% or more of the income. Lenders are still working out the mortgage lender overlays, but expect better programs come spring. If you want to buy,  take advantage of the pricing, prices (which are rising), and low down payment requirements. This is probably the last year in most markets where we will see an undervalued bargain. Moving forward, you can expect an auction market to return where bidders will out-price each other till they get what they desire

Waiting will no longer be a virtue, rent will go sky high, and prices will become unaffordable. Get with a loan professional to go over your credit, and get your deposits and income in order, for compliance is the name of the game.

Large deposits, gifted money, unverifiable income, and recent credit purchases are all being looked at carefully and need to be thoroughly reviewed prior to submitting the mortgage loan package for processing and underwriting. If you pay rent, make sure you pay in check, not cash. This is because that is the only way verification of rent will be valid. If you apply for a home loan, do not apply for a car and furniture loan the next day or any other credit either prior or during the mortgage loan process. The name of the game is to package and present yourself as a candidate worth lending to, and everything matters

Good luck!