Norada Real Estate Investments

Archives for December 2024

Mortgage Rates Are Predicted to Stay Above 6% in 2025

by

Are you planning to buy or sell a home in 2025? Mortgage rates to stay above 6% in 2025, according to the Realtor.com® economic research team, and this could impact your home buying or selling journey. While there might be some slight improvements in the housing market, including a larger supply of homes for sale, the elevated mortgage rate environment will likely persist. Let's dive into the details of this prediction and what it might mean for you.

Mortgage Rates To Stay Above 6% in 2025: What Homebuyers and Sellers Should Expect

The 2025 Housing Forecast: Mortgage Rates and Home Prices

The Realtor.com® economic research team has released its housing forecast for 2025, and it paints a picture of a housing market where mortgage rates are expected to stay above the 6% mark. Specifically, the forecast anticipates that the average mortgage rate for 2025 will be 6.3%, dropping slightly to 6.2% by the year's end.

This prediction is significant because it means that while the average rate is expected to decrease from the 6.7% predicted for the end of 2024, it's still considerably higher than the historical average of 4% observed between 2013 and 2019.

Personally, I find this prediction to be a bit concerning for those looking to buy a home. While a slight decrease from the projected rate in 2024 is good news, 6% is still a relatively high level. I believe this will continue to put pressure on buyers, especially those with limited budgets.

This forecast also indicates that home prices will continue to rise, albeit at a slower pace than in recent years. Home prices are predicted to grow by an additional 3.7% in 2025, following a 4% increase in 2024 and a 1.1% rise in 2023. This means that even with a slight moderation in price increases, homes are likely to remain expensive in 2025.

Impact on Homebuyers in 2025

The outlook for prospective homebuyers in 2025 is a mix of good and bad news. While the forecast projects that the market might become a little friendlier with more homes for sale and some price reductions, the persistent mortgage rates above 6% will likely keep homeownership out of reach for some.

  • Elevated Mortgage Rates: Homebuyers shouldn't expect a dramatic decline in mortgage rates back to the levels seen in September 2023 (near 6%). Instead, they should plan their budgets and finances around the mid-6% range.
  • Affordability Still a Challenge: Even though the forecast projects a slight improvement in affordability, this won't be driven by falling home prices. Rather, any gains will likely stem from rising wages or increased disposable income, such as from tax breaks. I believe that this indicates that there will still be a significant challenge for people to afford a home in 2025.
  • Increased Inventory & Price Reductions: There's some good news. The supply of homes for sale is expected to increase, reaching levels last seen before the COVID-19 pandemic. In October 2023, approximately 20% of listings featured price reductions, showing a shift in the market towards a more balanced buyer-seller dynamic.
  • More Time to Decide: The increased inventory is likely to give buyers more time to evaluate options and make decisions. However, it's still advisable to be prepared financially and strategically in order to snag the best deal.

Example: Let's say you are looking for a home with a price of $300,000. With a 6.3% mortgage rate, your monthly mortgage payment would be significantly higher than it would have been with a 4% mortgage rate. This means that you would either need a larger down payment to afford the same house, or you might need to consider a less expensive home to stay within your budget.

In short: While the forecast indicates a slightly more buyer-friendly market with increased supply and some price reductions, the persistence of elevated mortgage rates above 6% in 2025 will still make home buying a challenge for many people.

Forecast for Home Sellers in 2025

Sellers in 2025 can expect a shift away from the strong seller's market that has characterized recent years. The market is heading towards a more balanced state, where buyers and sellers have more equal footing.

  • Balanced Market Power: The shift towards a balanced market means that sellers will need to be more strategic in their pricing and approach to attract buyers.
  • Careful Pricing: In areas where affordability is a concern, sellers will need to be cautious about pricing their homes too high. I believe that those who are not flexible with pricing will struggle to find buyers.
  • Incentives Could Help: Offering incentives to buyers, such as covering closing costs, could help sellers stand out and attract potential buyers.
  • Desirable Locations Still Favorable: In desirable areas with strong demand and limited inventory, sellers might still have an advantage in negotiations.
  • Flexibility is Key: In my experience, sellers who are flexible and willing to adapt their strategies will be more successful in selling their homes.

Example: Let's say you are selling your home in a suburb with high demand and limited inventory. You might still be able to get close to your asking price. However, if you are selling in an area with a lot of inventory and more competition, you will likely need to be more flexible with your pricing and willing to negotiate.

The Bottom Line for Sellers: The market will be more balanced and competitive. Sellers who understand the nuances of the shifting market and adapt their strategies will be best positioned to achieve their goals.

Rental Market Trends in 2025

The rental market is also expected to see some changes in 2025.

  • Slight Rent Decline: Asking rents are projected to drop slightly by 0.1% in 2025, following a small dip in 2024 and a 1.2% growth in 2023.
  • Moderated Rent Growth: The projected rent growth is far lower than the average annual increase of 5.2% experienced between 2013 and 2019.
  • Increased Rental Supply: This moderation is likely due to the expansion of new multifamily housing units in recent years, easing supply constraints in certain cities.
  • Rental Vacancy Rates: While vacancy rates have risen since the pandemic's start, they remain below the historical average. I believe that this will further moderate rent growth.
  • Regional Differences: The South is expected to see the most significant growth in rental stocks, followed by the West, Midwest, and Northeast. This suggests that the South might offer a relative affordability advantage.

Example: If you are considering renting in 2025, you might find that the overall increase in rental inventory leads to a bit more choice and a slower pace of rent increases than in recent years. You might also find that the South offers slightly more affordable options compared to other regions.

In a Nutshell for Renters: Expect a more balanced rental market with a slight decline in rents and a potential increase in rental inventory. The South might offer more affordable options.

Factors Contributing to the Forecast

Several factors are driving the predictions for mortgage rates above 6% and other market dynamics in 2025.

  • The Federal Reserve's Actions: The Federal Reserve has been actively raising interest rates to combat inflation. I believe that the Fed will likely continue to monitor inflation and adjust rates accordingly. This could potentially influence mortgage rates.
  • Inflation and Economic Conditions: Inflation has been a significant factor impacting the housing market. It's a major factor impacting borrowing costs.
  • Housing Supply and Demand: The shift towards a more balanced market with an increase in inventory and some price reductions is a result of market forces, such as changes in buyer and seller behavior.

Preparing for the 2025 Housing Market

Whether you're a buyer, seller, or renter, it's wise to be prepared for the market conditions that are anticipated in 2025.

  • Buyers: Begin planning your finances now. Get pre-approved for a mortgage, understand your budget, and be prepared to move quickly when you find a suitable property.
  • Sellers: Work with a real estate professional to determine a competitive listing price. Consider offering incentives to buyers to make your home stand out. Be prepared to negotiate.
  • Renters: Monitor the rental market in your area and be prepared to compare different options.

Conclusion

The housing market in 2025 is expected to be a bit different from the recent past. Mortgage rates to stay above 6% and home prices are expected to continue to rise, albeit at a slower pace. The increase in housing inventory and some price reductions could create a more balanced market for buyers. However, the higher mortgage rates are likely to remain a significant hurdle for many.

In my opinion, the housing market will continue to be influenced by factors such as inflation, interest rates, and the supply of homes. I believe that buyers will need to be prepared for a more competitive market, while sellers should adapt their strategies to attract buyers.

As always, the best approach is to work closely with a real estate professional who can provide you with insights specific to your location and situation. Stay informed about market trends and be prepared to adjust your plans accordingly.

Partner with Norada, Your Trusted Source for Turnkey Investment Properties

Discover high-quality, ready-to-rent properties designed to deliver consistent returns. Contact us today to expand your real estate portfolio with confidence.

Reach out to our investment counselors:

(949) 218-6668 | (800) 611-3060

Contact Us Today

 

Will Mortgage Rates Fall Below 6% in 2025: Expert Insights

by

It's a question on many homeowners' and aspiring homebuyers' minds: Will mortgage rates fall below 6% in 2025? Based on current forecasts from reputable sources like Realtor.com, Bright MLS, and Fannie Mae, it's unlikely that mortgage rates will dip below 6% in 2025.

While some projections suggest a slight decrease towards the end of the year, the general consensus is that rates will hover around the 6% mark, perhaps even slightly higher. Let's dive deeper into the factors influencing these predictions and what it could mean for the housing market.

Will Mortgage Rates Fall Below 6% in 2025?

Currently, we're in a period of relatively higher mortgage rates compared to the historically low rates we experienced in the aftermath of the 2008 financial crisis. The Federal Reserve's efforts to combat inflation by increasing interest rates have significantly impacted the 30-year fixed mortgage rate, which generally moves in tandem with the 10-year Treasury yield.

As a homeowner and someone who's been actively following the housing market for years, I’ve noticed a direct correlation between the Federal Reserve's actions and how it affects interest rates and, subsequently, mortgage rates. It's a complex system, but it's clear that the Fed plays a critical role in shaping the environment for borrowing money, including mortgages.

Forecasts for 2025 and Beyond

Several key players in the real estate industry have released forecasts for mortgage rates in 2025. Here's a summary of their projections:

  • Realtor.com: Predicts an average 30-year mortgage rate of 6.3% in 2025, falling slightly to 6.2% by year-end.
  • Bright MLS: Estimates an average 30-year mortgage rate of 6.4% in 2025, with a projected decline to 6.25% by the end of the year.
  • Fannie Mae: Forecasts an average 30-year mortgage rate of 6.4% in 2025, concluding the year at 6.3%.

Interestingly, Fannie Mae's prediction is a significant shift from its earlier outlook, where they anticipated rates falling below 6% in early 2025. The volatility in financial markets and uncertainty surrounding economic policies have contributed to this revised forecast.

Key Factors Influencing Mortgage Rate Predictions

Several factors are influencing these predictions for mortgage rates in 2025. Let's examine the most important ones:

1. The Federal Reserve's Actions:

The Federal Reserve's decisions on interest rates are a primary driver of mortgage rates. The Fed's goal of managing inflation plays a significant role in setting the stage for interest rates. As I see it, if the Fed continues its course of increasing rates or even maintaining them at current levels to address inflation, it's likely that mortgage rates will remain elevated.

2. Economic Growth and Inflation:

A robust U.S. economy can lead to increased inflation. This, in turn, could prompt the Federal Reserve to hold interest rates higher, impacting mortgage rates. This is something I personally keep a close eye on as it can significantly impact the housing market.

3. Government Policies:

  • Trump's Policies: Certain policy proposals put forward by the Trump administration, like tariffs and immigration policies, could potentially fuel inflation and worsen the federal deficit. These factors could exert upward pressure on mortgage rates.
  • Privatization of Fannie Mae and Freddie Mac: The potential privatization of these government-sponsored enterprises could also impact mortgage rates. Some analysts believe that privatization might lead to higher mortgage rates, though there's skepticism about whether this plan will garner sufficient support.

4. Global Economic Conditions:

The global economy plays a role in influencing mortgage rates. Factors like geopolitical events, international trade agreements, and economic growth in other countries can affect investor sentiment and the demand for U.S. Treasury bonds, which, as mentioned before, influence mortgage rates.

5. Volatility in Financial Markets:

Financial markets are susceptible to fluctuations in response to economic news and policy changes. This volatility can create uncertainty about the future direction of interest rates and can contribute to fluctuations in mortgage rates.

What Could Happen Beyond 2025?

Looking beyond 2025, most experts anticipate mortgage rates to continue hovering around the 6% level. Lawrence Yun, chief economist at the National Association of Realtors, suggests that a return to the 4% rates we saw in the past is unlikely. It's more probable that rates will settle in a range between 5.5% and 6.5%.

Could rates go even higher?

Yes, it's conceivable that mortgage rates could climb even further if inflationary pressures intensify or if the Federal Reserve adopts a more aggressive approach to managing inflation. This is one scenario I'm watching closely, as it could alter the housing market landscape in the years to come.

What This Means for Homebuyers and Sellers

These predictions for mortgage rates have implications for both homebuyers and sellers.

  • Homebuyers: If mortgage rates remain around or above 6%, it could make purchasing a home more expensive. Buyers might need to adjust their budgets and consider homes in lower price ranges or explore different mortgage products to accommodate the higher costs.
  • Home Sellers: The higher mortgage rates might moderate buyer demand, potentially slowing down the pace of home price appreciation. In a slower market, sellers might need to be more realistic about their pricing expectations and be prepared to negotiate more with buyers.

Final Thoughts: My Perspective

While it's challenging to predict with absolute certainty what mortgage rates will do in the future, the current outlook suggests that a return to the ultra-low rates of the past is unlikely in the near term. Based on my experience and knowledge of the housing market, I believe that mortgage rates will likely remain around the 6% mark in 2025 and beyond, potentially experiencing minor fluctuations in response to economic conditions and Fed policy decisions.

It's wise for homebuyers and sellers to remain informed about the prevailing market conditions and adjust their strategies accordingly. Staying informed about economic trends, interest rate movements, and the overall housing market is crucial in navigating the current environment.

Partner with Norada, Your Trusted Source for Turnkey Investment Properties

Discover high-quality, ready-to-rent properties designed to deliver consistent returns. Contact us today to expand your real estate portfolio with confidence.

Reach out to our investment counselors:

(949) 218-6668 | (800) 611-3060

Contact Us Today

 

Will the Fed Cut Interest Rates in December: Expert Predictions

by

Will the Fed cut interest rates in December 2024? Current indicators suggest that the likelihood is quite high, with recent job reports intensifying the conversation around a possible interest rate cut during the Federal Reserve's upcoming meeting. The economic context surrounding this potential decision is complex, involving a mix of strong labor market metrics and persistent inflationary pressures.

Will the Fed Cut Interest Rates in December: Expert Predictions

Key Takeaways

  • High Probability of a Cut: Recent job data indicates a 90% chance that the Federal Reserve will approve a rate cut this December.
  • Diverse Opinions: Economists are divided, with varying perspectives on the necessity and timing of any cuts, largely due to inflation concerns.
  • Solid Job Market: Despite a robust job market, there are apprehensions regarding inflation and financial stability.
  • Upcoming Data Will Influence Decisions: The Fed is likely to analyze upcoming reports on consumer and producer prices which could sway their final decision.

As December approaches, all eyes are on the Federal Reserve. The Fed, helmed by Chairman Jerome Powell, is navigating treacherous economic waters. The decision-making process to cut interest rates is influenced by a variety of factors—from employment rates to inflation metrics. Let’s delve deeper into the reasoning behind the projected rate cut and what it means for the economy.

Current Economic Landscape

The backdrop of discussions around interest rates is the backdrop of a surprisingly strong labor market. The latest November nonfarm payrolls report showed an impressive addition of 227,000 jobs, far surpassing the dismal 36,000 jobs anticipated in October. This substantial job growth is an encouraging sign, as it underscores a resilient economy, particularly in light of potential recessionary fears that many analysts had just a few months prior.

The unemployment rate, while ticking up slightly to 4.2%, still reflects a relatively healthy job market. Even with this increase, it reveals that less than one in twenty workers are jobless, a statistic that most economists would consider stable if not strong. Nobody has forgotten that the economy has not reported job losses in a single month since December 2020. This resilience gives the Fed a compelling reason to reconsider their current interest rates, possibly leading them to cut in December.

Inflation Concerns

Nonetheless, the Fed’s deliberation is complex. Price stability remains one of the core objectives for the central bank, and recent inflation data has raised eyebrows. The Fed's preferred inflation indicator recently noted a rise to 2.3% in October, exceeding the desired 2% target, while inflation excluding food and energy costs surged up to 2.8%.

According to an article by CNBC, the implications of these figures are far-reaching. Jason Furman, a former economist under the Obama administration, highlighted that current wage growth—averaging around 4%—is consistent with inflation rates considerably higher than the Fed's aim. Such signals prompt concern among economists about the need for aggressive monetary policy adjustments. As Furman aptly noted, the economy currently seems to be in a “no-landing scenario,” where robust growth continues but risks sparking further inflation.

Financial Stability and the Debate Among Economists

As the Federal Reserve contemplates a December rate cut, a significant point of contention among economists and policymakers is the current financial conditions. Financial metrics indicate that the economy is experiencing the most relaxed financial conditions we've seen since January. Joseph LaVorgna, a prominent economist, warned on CNBC that this easing could foster speculative bubbles, expressing doubt about the necessity of a rate cut at this junction. LaVorgna advocates for a pause in rate adjustments until clearer signs of economic distress emerge.

Compellingly, Chris Rupkey, another respected economist, challenges the rationale behind the Fed’s continuous rate cuts. He asserts that with job growth remaining robust, “there’s no need to be tinkering with measures to boost the economy.” Rupkey's viewpoint reflects concerns that further reductions may be “unwise,” especially as inflation remains stubborn.

The Fed's Internal Debate: Weighing Growth Against Inflation

The disagreements among economists hint at the broader internal debate within the Federal Reserve itself. While some officials, such as Cleveland Fed President Beth Hammack, advocate for a cautious approach—pointing to solid growth—but call for more data to confirm the inflation trajectory before further cuts. Hammack’s stance illustrates that Fed policymakers are not only wary of inflation; they are also increasingly attuned to the solid performance of the economy. Many members of the rate-setting committee recognize the issues of moving too quickly to rein in rates and potentially derailing economic momentum.

The discussion also centers heavily around the concept of the neutral rate. The neutral rate is a crucial term that denotes the interest rate level that neither stifles growth nor initiates expansion. It is generally viewed as a stable point where the economy does not accelerate or contract. Recent analyses suggest this neutral rate may be higher than what historical perspectives would advise, complicating the Fed's assessment of their current interest rate position.

Looking Forward: Factors at Play

As we close in on the Federal Reserve’s December meeting, the timeline suggests additional indicators may affect their decision. In the upcoming weeks, analysts will closely watch the projected reports for consumer prices and producer prices. These indicators will play a significant role in influencing the Fed's sentiment and could sway their decision-making process dramatically.

Tom Porcelli, chief U.S. economist at PFIM Fixed Income, advocates for a proactive stance. He believes that current data provides little reason to halt the rate cut scheduled for December. Porcelli argues that the Fed has been operating under a different set of inflation expectations since they initially raised rates, suggesting that it’s appropriate to normalize policy now to better align with the current economic landscape.

The Bigger Picture: Global Considerations and Domestic Implications

The implications of the Fed’s decisions extend beyond merely adjusting numeric targets; they resonate throughout the global economy. As Jerome Powell acknowledges, the U.S. economy is touted as the envy of many developed nations. This observation places additional responsibility on the Fed to ensure that their monetary policies do not negatively affect international partnerships or trade relations.

Fiscal policies being orchestrated at the governmental level also intertwine with monetary strategies. For instance, the potential return of shifts in tariffs under a new presidential administration may add further pressure regarding inflation. If tariffs are imposed, the cost of imported goods is likely to rise, feeding into inflation and complicating the Fed’s mitigation efforts.

Final Thoughts on Upcoming Decisions

Ultimately, the decision regarding whether the Fed will cut interest rates in December 2024 is complicated. While recent job growth data pushes the probability of a cut up to 90%, inflationary pressures cannot be disregarded. Without a doubt, the upcoming meetings will be a focal point for not just economists but also businesses and consumers who will feel the effects of these decisions.

In conclusion, all eyes will remain on the Federal Reserve as they balance these competing interests. Will they prioritize robust job growth, or will concern for inflation guide their decisions? The answers are yet to be determined, but viewpoints from various economists indicate that the upcoming months will be pivotal.

10 Best Real Estate Markets for Investors in 2025

by

Ever dreamed of building a serious real estate portfolio? Finding the 10 best real estate markets for investors is the first step to making that dream a reality. It's not just about luck; it's about smart choices, solid research, and knowing where the opportunities are hiding. This guide dives deep into ten markets currently showing impressive growth potential for investors, but remember: real estate investment involves risk.

This isn't some get-rich-quick scheme. Over the years, I've witnessed both booming successes and painful setbacks in the real estate world. I've learned that the most successful investors are those who do their homework, understand market trends, and aren't afraid to get their hands dirty. This article shares what I’ve learned, guiding you to potentially lucrative investment opportunities while acknowledging the risks involved.

Understanding the Real Estate Investment Landscape

Before we dive into the 10 best real estate markets for investors, let's clarify what makes a market “best.” It's not solely about high prices; it's a complex mix of factors. We'll consider:

  • Strong Rental Demand: Are there plenty of renters looking for places to live? High demand translates to higher rental yields, a key factor for investors.
  • Property Appreciation: Is the value of properties in the area steadily climbing? This is crucial for long-term investment returns.
  • Job Growth: A thriving job market attracts residents, fueling rental demand and boosting property values.
  • Affordable Housing: Even in growing markets, relatively affordable properties can be a great entry point for investors.
  • Low Vacancy Rates: Low vacancy rates indicate high demand, making it easier to find tenants and maintain occupancy.
  • Economic Stability: A stable local economy is less likely to experience sudden downturns, protecting your investment.

These factors work together, so it’s not just about picking the highest-priced area. You need a well-rounded approach.

10 Best Real Estate Markets for Investors in 2025

10 Investment Hotspots for 2025

Austin, Texas

Tech Hub

Raleigh, NC

Education Powerhouse

Nashville, TN

Cultural Hotspot

Phoenix, AZ

Retirement Haven

Tampa, FL

Growing Tech Scene

Boise, ID

Hidden Gem

Charlotte, NC

Financial Center

Dallas-Fort Worth, TX

Diverse Economy

Atlanta, GA

Film Industry Boom

Salt Lake City, UT

Tech Growth

It's always recommended to do latest market research and analysis before making an investment decision.

 

Now, let’s get into the meat of the matter – the ten markets showing strong potential for real estate investors in 2024. This isn't an exhaustive list, and market conditions are always shifting, so continuous research is crucial. My recommendations are based on publicly available data, but you should always conduct your own thorough due diligence.

1. Charlotte, North Carolina:

Charlotte boasts a strong economy, driven by finance, healthcare, and technology. Population growth is significant, and rental rates are rising steadily. It's a good market for both residential and commercial investments. The appeal of Charlotte lies in its relatively balanced market – not too hot, not too cold, and showing steady, sustainable growth.

  • Fortune 500 Hub: Charlotte is home to the headquarters of nine Fortune 500 companies, including Bank of America and Duke Energy, further solidifying its strong financial and energy sectors.
  • Population Boom: Charlotte's metro area population has grown over 20% in the last decade, significantly outpacing the national average, driving housing demand.
  • Thriving Job Market: The city consistently ranks high in job growth, with sectors like tech and healthcare experiencing particularly rapid expansion.
  • Relatively Affordable: Compared to other major southeastern cities, Charlotte offers a relatively lower cost of living, making it attractive to both residents and businesses.
  • Transportation Infrastructure: Charlotte Douglas International Airport is a major hub, connecting the city to numerous domestic and international destinations, boosting its appeal for businesses and tourism.

2. Nashville, Tennessee:

Nashville's music scene is just the tip of the iceberg. This city's economy is booming, fueled by healthcare, tourism, and a growing tech sector. The influx of people translates to high demand for housing, making it a potentially lucrative market for real estate investors seeking strong rental yields.

  • Healthcare Hub: A major center for healthcare, with numerous hospitals and healthcare companies headquartered there.
  • Tourism Boom: “Music City” attracts millions of tourists annually, supporting a thriving hospitality industry.
  • Emerging Tech Scene: A growing tech sector adds to the city's economic diversity and attracts skilled workers.
  • High Rental Demand: The influx of young professionals and tourists creates strong demand for rental properties.
  • Limited Inventory: Relatively low housing inventory compared to demand contributes to rising property values.

3. Austin, Texas:

Austin's tech industry is a major driver of its economy, attracting young professionals and boosting property values. While competition is fierce, the potential for significant returns makes it a market to watch for those who can navigate the high-demand environment.

  • Tech Powerhouse: Home to major tech companies and a vibrant startup scene, driving innovation and job growth.
  • High-Income Residents: The tech industry attracts high earners, increasing demand for upscale housing.
  • University Presence: The University of Texas at Austin provides a steady stream of young professionals.
  • Strong Appreciation Potential: Property values have historically appreciated significantly, though competition is intense.
  • Limited Housing Supply: Rapid growth has outpaced housing construction, contributing to high prices.

4. Tampa, Florida:

Tampa offers a blend of affordability and growth. Its diverse economy and warm climate make it attractive to both residents and tourists. For investors seeking a solid, mid-range option with less extreme competition than Austin or Nashville, Tampa deserves consideration.

  • Diverse Economy: A mix of tourism, healthcare, finance, and technology provides economic stability.
  • Warm Climate: Attracts retirees and those seeking a year-round outdoor lifestyle.
  • Growing Job Market: Experiencing steady job growth across multiple sectors.
  • Relatively Affordable: Compared to other Florida cities, Tampa offers more affordable housing options.
  • Beachfront Properties: Investment opportunities exist in coastal areas, appealing to vacationers and renters.

5. Phoenix, Arizona:

Phoenix has experienced considerable growth in recent years, driven by a favorable climate and a diverse economy. This market is attractive to investors looking for opportunities in a Sun Belt city, but the increased competition in this rapidly growing market demands careful consideration.

  • Population Boom: One of the fastest-growing cities in the US, driving demand for housing.
  • Affordable Living (Relatively): While prices are rising, Phoenix remains more affordable than many coastal cities.
  • Sunny Climate: Attracts retirees and those seeking warm weather year-round.
  • Growing Job Market: Expanding job opportunities in healthcare, technology, and renewable energy.
  • Land Availability: Ample land for development offers opportunities for new construction projects.

6. Raleigh, North Carolina:

Similar to Charlotte, Raleigh benefits from a strong economy, especially in the technology and research sectors. Its growing population and relatively stable market make it an appealing option for investors seeking steady, predictable returns.

  • Research Triangle Park: Home to a major research park, attracting highly skilled workers and driving innovation.
  • University Presence: Several major universities contribute to a strong talent pool and research activity.
  • Stable Market: Generally considered a more stable and less volatile market compared to some others.
  • Growing Population: Steady population growth supports increasing housing demand.
  • Quality of Life: High quality of life attracts families and young professionals.

7. Atlanta, Georgia:

Atlanta offers a blend of affordability and growth potential. Its large economy and diverse job market make it a safe bet for those willing to conduct thorough research in this sprawling metropolitan area. This is a significant market, so investors need to understand the nuances of its various neighborhoods.

  • Major Transportation Hub: Home to a busy international airport, facilitating business and tourism.
  • Diverse Job Market: A wide range of industries, from logistics to entertainment, provides employment opportunities.
  • Cultural Center: A vibrant arts and culture scene attracts residents and visitors.
  • Affordability (Relative): While prices are rising, Atlanta remains relatively affordable compared to other major cities.
  • Sprawling Metropolis: Requires careful neighborhood research due to varying levels of investment potential.

8. Jacksonville, Florida:

Jacksonville’s affordable housing options are attractive to those coming from more expensive coastal markets. With a more affordable cost of living compared to other Florida cities, Jacksonville offers a solid option for investors looking for value and potential growth.

  • Largest City by Area: Offers a wide range of neighborhoods and investment opportunities.
  • Military Presence: A large military presence provides a stable economic base.
  • Port City: A major port city, contributing to logistics and trade activity.
  • Affordable Housing: Lower housing costs compared to other Florida coastal cities.
  • Emerging Downtown: Ongoing downtown revitalization efforts are attracting new residents and businesses.

9. Dallas, Texas:

Dallas offers a mix of economic sectors that minimize the impact of downturns in any single industry. Investors can find different opportunities, and its strong economy makes it a dependable choice for many.

  • Strong Business Environment: A pro-business environment attracts corporations and fosters job growth.
  • Diverse Economy: A mix of industries, including technology, finance, and energy, provides resilience.
  • Growing Population: Consistent population growth supports demand for housing.
  • Central Location: A central location within Texas facilitates access to other major cities.
  • Relatively Affordable (Compared to Coasts): More affordable than coastal cities with similar job markets.

10. Denver, Colorado:

While more expensive than some other markets on this list, Denver's strong economy and natural beauty continue to attract new residents. For investors with a higher budget seeking potential appreciation in a desirable location, Denver is worth considering, but be aware of the higher barrier to entry.

  • Outdoor Recreation: Attracts residents who enjoy outdoor activities, driving demand for housing.
  • Growing Tech Scene: A growing tech industry adds to the city's economic diversity.
  • Strong Economy: A diversified economy with strong job growth.
  • High Quality of Life: Known for its high quality of life and desirable amenities.
  • Higher Barrier to Entry: Higher property values require a larger initial investment compared to some other markets.

Important Considerations for Investors

Remember, this isn't financial advice. Before investing in any market, do your due diligence:

  • Local Market Research: Go beyond national averages and dive deep into local market trends, rental rates, and property values.
  • Property Management: Factor in property management costs and the time commitment required.
  • Financing: Secure financing that aligns with your investment strategy and risk tolerance.
  • Legal and Tax Implications: Understand the legal and tax implications of real estate investment in your chosen market.

Partner with Norada, Your Trusted Source for Turnkey Investment Properties

Discover high-quality, ready-to-rent properties designed to deliver consistent returns. Contact us today to expand your real estate portfolio with confidence.

Reach out to our investment counselors:

(949) 218-6668 | (800) 611-3060

Contact Us Today

 

Conclusion:

Finding the 10 best real estate markets for investors requires careful consideration of numerous factors. While the markets listed above show significant promise, remember that real estate investment always carries risk.

By combining thorough research with a well-defined investment strategy, you can increase your chances of success in this potentially rewarding field. Don't be afraid to seek advice from professionals, and always prioritize understanding the risks before making any investment decisions.

 

Housing Markets at Risk: California, New Jersey, Illinois, Florida

by

Are you curious about which US housing markets are most vulnerable to a potential decline? Based on a recent report by ATTOM, a leading provider of property data, California, New Jersey, Illinois, and Florida are facing a higher risk of housing market declines due to factors like affordability, underwater mortgages, and unemployment.

While the overall national housing market remains robust, these areas exhibit specific characteristics that might make them more susceptible to downturns in the near future. Let's dive deeper into the specifics of this report and explore the factors contributing to these vulnerabilities.

US Housing Markets at Risk of Decline: Where Are the Most Vulnerable Areas?

In the third quarter of 2024, ATTOM released its Special Housing Market Impact Risk Report, providing a county-level analysis of housing market vulnerabilities across the US. This report uses a combination of key indicators, such as home affordability, equity, and foreclosure rates, to determine which areas are more or less prone to potential declines.

I found it really interesting how the report highlighted that the picture of which areas are most at risk has shifted somewhat compared to previous quarters. While California, New Jersey, and Illinois have consistently been flagged as areas of concern, Florida's inclusion in the ‘at-risk' category is more recent.

The methodology used in the report is quite comprehensive. They considered several factors including the percentage of homes with potential foreclosure actions, the number of homeowners with mortgage balances higher than the estimated value of their properties, the proportion of local wages needed for major homeownership expenses, and local unemployment rates.

The Most Vulnerable Housing Markets

Based on the report, certain metropolitan areas and specific counties are facing greater challenges. Let's take a closer look:

  • Vulnerable Housing Markets Clustered Around Chicago, New York City, and Inland California: The report identified that 24 out of the 50 counties considered most vulnerable to housing market issues were located in or around New York City, Chicago, and inland California.
    • Illinois: Counties like Cook, Kane, Kendall, McHenry, and Will around Chicago showed increased vulnerability.
    • New York: Both Kings County (Brooklyn) and New York County (Manhattan) were among the most at-risk, along with suburban areas like Essex, Passaic, and Sussex in Northern New Jersey.
    • California: Inland counties like Butte, Contra Costa, El Dorado, Humboldt, and Solano in northern California were flagged as vulnerable, along with Kern, Kings, Madera, Merced, San Joaquin, Stanislaus, Riverside, and San Bernardino counties in the central and southern parts of the state.

It was surprising to me how the report demonstrated that specific areas within these states are facing the most difficulty. For instance, certain inland counties in California have been more affected than the coastal areas.

Factors Contributing to Vulnerability

The ATTOM report identifies several underlying factors contributing to increased vulnerability in these housing markets. Let's examine them in detail:

1. Worsening Affordability:

  • The report noted that in many of the most at-risk counties, homeownership costs (including mortgage payments, property taxes, and insurance) for a typical home were consuming a large portion of average wages.
  • In 30 out of the 50 most vulnerable counties, these costs were exceeding 43% of average local wages, which is considered significantly unaffordable.
  • Some of the highest percentages were found in areas like Kings County (Brooklyn) where homeowners needed over 100% of their average local wages to cover those costs, followed by Riverside County, CA at 70.2%, El Dorado County, CA at 66.3%, and Passaic County, NJ at 65.9%.

It makes sense that affordability issues would have a big impact on the housing market. If people can't afford to buy or maintain a home, it can lead to foreclosures and a decrease in demand.

2. Underwater Mortgages:

  • Underwater mortgages occur when homeowners owe more on their mortgage than their property is currently worth.
  • A concerning trend revealed in the report is that at least 6% of residential mortgages were underwater in 23 of the 50 most-at-risk counties in the third quarter of 2024.
  • The national average for underwater mortgages was 5.5%.
  • The counties with the highest underwater mortgage rates among the most vulnerable included St. Clair County, IL at 15%, Tangipahoa Parish, LA at 13.7%, Pinal County, AZ at 12.4%, Philadelphia County, PA at 11.9%, and Marion County, FL at 11%.

I've always seen underwater mortgages as a significant risk factor for housing markets. If a large number of homeowners are underwater, they might be more likely to default on their mortgages, leading to foreclosures and downward pressure on home prices.

3. Foreclosure Activity:

  • In 35 of the 50 most vulnerable counties, more than one in every 1,000 residential properties faced a foreclosure action in the third quarter of 2024.
  • The nationwide average was one in 1,618 homes.
  • Some counties experienced significantly higher foreclosure rates, including Charlotte County, FL (one in 449), Osceola County, FL (one in 473), Dorchester County, SC (one in 509), Cumberland County, NJ (one in 571), and Warren County, NJ (one in 574).

4. Unemployment Rates:

  • Unemployment played a role in the vulnerability of many areas as well.
  • 34 of the 50 most at-risk counties had unemployment rates of at least 5% in August 2024, compared to the national average of 4.2%.
  • Merced County, CA had the highest unemployment rate at 9.1%, followed by Kern County, CA (8.7%), Kings County, CA (8.2%), Cumberland County, NJ (7.7%), and Madera County, CA (7.4%).

I think it's pretty clear that unemployment has a significant negative impact on the housing market. When people lose their jobs, they often struggle to keep up with mortgage payments, which can lead to foreclosure and a decline in home values.

The Least Vulnerable Housing Markets

In contrast to the vulnerable areas, the report identified several regions that are less likely to experience significant housing market declines. These areas are mainly concentrated in the South and the Midwest.

  • South: Twenty-two of the 50 least vulnerable counties were in the South. Tennessee had the largest concentration of these counties, including those in the Nashville, Knoxville, and Chattanooga metro areas.
  • Midwest: Thirteen of the 50 least-vulnerable counties were in the Midwest, with Wisconsin having seven, including those in the Green Bay, Madison, and Oshkosh areas.
  • Northeast: Eleven of the 50 counties were located in the Northeast.
  • West: Only four of the 50 counties were located in the West.

Factors Contributing to Resilience

The report also sheds light on the factors contributing to the resilience of the least vulnerable housing markets.

1. Better Affordability:

  • In contrast to the most vulnerable markets, homeownership costs in the least vulnerable markets were considered seriously unaffordable in only 17 of the 50 counties.
  • Potter County, TX, had the lowest percentage of wages needed for homeownership at 19.1%, followed by Oswego County, NY at 21.8%, Sullivan County, TN at 25.9%, Shawnee County, KS at 26.5%, and Madison County, AL at 26.9%.

2. Lower Underwater Mortgages:

  • Only one of the 50 least-at-risk counties had more than 6% of residential mortgages underwater.
  • The counties with the lowest underwater mortgage rates included Chittenden County, VT (0.8%), Loudoun County, VA (1.6%), Rockingham County, NH (1.9%), Henrico County, VA (2%), and Hillsborough County, NH (2%).

3. Low Foreclosure Rates:

  • None of the least-vulnerable counties had more than one foreclosure action per 1,000 residential properties.
  • Yellowstone County, MT, had the lowest foreclosure rate, with only one in 72,252 homes facing foreclosure. Other counties with very low rates included Missoula County, MT, Berkeley County, WV, Medina County, OH, and Chittenden County, VT.

4. Low Unemployment:

  • 48 of the 50 least-vulnerable counties had unemployment rates lower than the national average of 4.2%.
  • Dane County, WI, had the lowest unemployment rate at 2.1%, followed by Chittenden County, VT (2.1%), La Crosse County, WI (2.2%), Outagamie County, WI (2.3%), and Cumberland County, ME (2.3%).

Implications for Homebuyers and Investors

The ATTOM report provides valuable insights for both homebuyers and investors looking to navigate the current housing market.

  • Homebuyers in the most vulnerable areas might want to consider the affordability challenges and potential for future market declines before making a major purchase.
  • Investors might want to focus on markets with stronger fundamentals and lower risk profiles, particularly those in the South and Midwest.

Furthermore, it's crucial to remember that this report spotlights areas that appear to be more or less vulnerable to changes in market conditions. It's not a prediction that any specific area is guaranteed to experience a downturn or remain immune from problems.

I've always emphasized the importance of doing your due diligence when making any real estate decisions. This report can serve as a valuable starting point for your research, but it's vital to consider local market conditions, economic trends, and other factors before making any major investment decisions.

Conclusion

The US housing market is currently in a dynamic phase, with varying degrees of vulnerability across different regions. Based on the ATTOM report, housing markets in California, New Jersey, Illinois, and Florida appear to be facing higher risks due to factors like affordability, underwater mortgages, foreclosures, and unemployment.

Conversely, areas in the South and Midwest seem to be exhibiting greater resilience. While the report offers a helpful snapshot of current trends, it's essential for both homebuyers and investors to conduct thorough research and consider the specific circumstances of individual markets before making significant real estate decisions.

Wyoming Housing Market Forecast for the Next 2 Years: 2025-2026

by

The Wyoming housing market in 2024 is showing strong signs of competitiveness, with home prices up 31.0% compared to last year and a median sale price of $275K. This trend suggests that the market remains robust despite potential economic headwinds. However, it's also important to acknowledge that this is a snapshot of the market in September, and conditions can change rapidly.

In this article, I will explore the key trends influencing the Wyoming housing market, delve into home sales, prices, and supply, and provide you with a better understanding of what to expect in the coming months.

Current Wyoming Housing Market Trends 2024

Home Sales

The latest data by Redfin reveals that home sales in Wyoming are brisk. The average time a home spends on the market before going pending is just 22 days, indicating a high demand and low inventory. This is a sign of a competitive market where buyers often need to act quickly to secure a property.

In September 2024, only 3 homes were sold, but it's worth noting that this data may be incomplete or not a representative sample of the entire state. I often find that local MLS data can provide more granular details about sales activity in specific regions and can be more useful for getting a realistic view of sales volume.

It's also crucial to consider that the “average” can be misleading. The real estate market in Wyoming is diverse, with smaller towns and cities experiencing different dynamics compared to larger urban centers. While some areas might experience brisk sales, others might be more balanced, with homes staying on the market a bit longer.

Home Prices

One of the most notable trends in the Wyoming housing market is the significant increase in home prices. As mentioned earlier, the median home price in September 2024 was $275K, which represents a 31% increase compared to the same period last year. This surge in prices is driven by several factors, which I will explore below.

The average price per square foot is $198 (although the data isn't clear whether this is for the same 3 home sales as in the previous section), which gives an idea of the value buyers are placing on housing in the state. While a 31% increase may seem dramatic, I've personally seen even steeper price escalations in certain localized areas due to factors like desirable locations, stunning views, or proximity to outdoor recreation.

Factors Driving Price Increases

  • Low Inventory: The number of available homes for sale in Wyoming remains low, creating a supply-demand imbalance that pushes prices upward. This shortage of inventory is a widespread issue across many parts of the country, and Wyoming is no exception.
  • Increased Demand: Wyoming continues to attract buyers from out of state. The appeal of wide-open spaces, stunning scenery, and a strong sense of community continues to draw individuals and families seeking a different pace of life.
  • Remote Work Trends: The shift to remote work has provided more flexibility for people to relocate to areas like Wyoming. Many individuals now have the option to work from anywhere with a reliable internet connection, making Wyoming a more appealing option.
  • Tourism and Recreation: Wyoming's stunning natural beauty and abundance of outdoor recreation opportunities, including skiing, hiking, fishing, and camping, draw visitors and potential residents.

Housing Supply

The housing supply in Wyoming continues to be a significant challenge, playing a pivotal role in the current market conditions.

As I mentioned earlier, the low inventory is one of the primary reasons behind the surging home prices. Limited housing supply means fewer choices for buyers, leading to bidding wars and escalating prices.

There are a few factors contributing to this scarcity:

  • Limited New Construction: The pace of new home construction hasn't kept up with the growing demand. While some developments are underway, the construction process can be slow due to various factors, including permitting, labor shortages, and material costs.
  • Existing Homes Staying on the Market for Shorter Periods: With high demand and limited inventory, homeowners who decide to sell find that their homes are often snapped up quickly, reducing the overall availability of homes in the market.
  • Population Growth: Wyoming's population is growing, further exacerbating the housing shortage. The increased demand from both in-state and out-of-state buyers puts a strain on the available housing stock.

Market Trends

The Wyoming housing market is dynamic and ever-changing, and it's essential to understand the underlying trends that are shaping its future.

Migration Trends:

The data on migration trends reveals some interesting insights.

  • Relocation within Wyoming: A significant majority (73%) of Wyoming homebuyers in the recent period searched to stay within the Wyoming metro area. This suggests a strong local market and a desire to remain in the state.
  • Inflow from Outside Metros: While the majority of homebuyers intend to stay within the state, there is a noticeable inflow of buyers from outside major metropolitan areas. New York leads the list of cities from which people are moving to Wyoming, followed by St. Louis and Los Angeles. This influx is likely influenced by the factors mentioned earlier, including the desire for a different lifestyle and the rise of remote work.
  • Outflow to Other States: While the state experiences an inflow of people from larger metropolitan areas, some Wyoming residents are also moving out. The most popular destinations for Wyoming residents are Washington DC, Salisbury, MD, and Harrisburg, PA. This outflow is likely driven by factors such as job opportunities and a desire to be closer to family and friends.

Overall Trend:

Based on the available data and my personal insights, the Wyoming housing market is expected to remain competitive for the foreseeable future. The low inventory and high demand are likely to continue influencing prices, although the pace of price increases might slow down if interest rates rise or the economy experiences a downturn.

Table Summarizing Key Trends

Trend Description Impact on Housing Market
Home Prices Increased 31% year-over-year Higher purchase costs for buyers
Home Sales Brisk sales with homes selling quickly (22 days) Competitive environment for buyers
Housing Supply Low inventory due to limited new construction and population growth Increased competition and upward pressure on prices
Migration Inflow of buyers from large metropolitan areas, particularly New York, St. Louis, and Los Angeles Increased demand for housing, pushing up prices
Interest Rates Likely to have an impact on affordability Could slow down price appreciation if rates rise significantly

The Impact of Interest Rates

Interest rates are a crucial factor that can impact housing affordability. If interest rates continue to rise, the cost of borrowing money to purchase a home will increase, potentially cooling down the market and slowing down the rate of price increases. While rates haven't yet had a dramatic effect on Wyoming, it's something I'm monitoring closely.

Wyoming Housing Market Forecast for the Next 2 Years: 2025-2026

Looking ahead, I expect the Wyoming housing market to remain relatively strong. The state's appeal as a place to live and work is unlikely to diminish, and this continued appeal will continue to create demand for housing. However, it's also important to be realistic. The market is likely to experience some fluctuations, and certain areas might see price corrections or slower growth.

Wyoming Housing Market Forecast by Region

I have analyzed the data from Zillow, a reputable source for real estate information, and created a table summarizing the forecasted changes in home values in different regions of Wyoming.

The Wyoming housing market is expected to experience mixed growth in the coming year. Some areas are expected to see price increases, while others are poised for a decline. The average Wyoming home value is currently $353,250, which is up 3.0% over the past year. Homes typically go pending in around 29 days. Let's take a closer look at the forecast for different regions of Wyoming.

Region October 2024 Forecast December 2024 Forecast September 2025 Forecast
Cheyenne, WY 0.2% -0.5% -2.3%
Casper, WY 0.2% -0.1% 0%
Gillette, WY 1% 0.8% 0.1%
Rock Springs, WY 0.6% 0.3% -1.3%
Riverton, WY 0.5% -0.1% 1%
Laramie, WY 0.6% 0.4% 0.8%
Jackson, WY 0% 0% 4.1%
Sheridan, WY 0.5% 0.2% 0.4%
Evanston, WY 0.8% 1% 2.8%

Regions Poised for Growth

Based on the data, Jackson, Evanston, and Gillette are the regions in Wyoming that are expected to see the highest growth in home prices through September 2025.

  • Jackson is projected to have a remarkable 4.1% increase by September 2025.
  • Evanston is expected to see a 2.8% increase.
  • Gillette is anticipated to see a 0.1% growth.

Regions Poised for Decline

Cheyenne and Rock Springs are the regions expected to see the biggest drops in home prices by September 2025.

  • Cheyenne is projected to see a -2.3% decline.
  • Rock Springs may experience a -1.3% decline.

Will Home Prices Drop in Wyoming? Will the Market Crash?

While some regions are predicted to experience a decline in home prices, it's important to note that these are just forecasts. A “crash” is typically characterized by a rapid and significant decline in home values, often exceeding 10%. The current forecast does not suggest a crash in the Wyoming housing market. The declines are relatively small and do not indicate a widespread or dramatic downturn.

Possible Wyoming Housing Market Forecast for 2026

Forecasting beyond a year or two becomes increasingly speculative. However, several factors could influence the Wyoming housing market in 2026. These include:

  • Interest rates: If interest rates rise significantly, it could dampen demand for housing and lead to price declines.
  • Economic conditions: A strong economy and job growth tend to support a healthy housing market.
  • Population growth: Wyoming has seen modest population growth in recent years, which could continue to support demand for housing.
  • Housing Inventory: A shortage of available homes for sale could put upward pressure on prices, while an oversupply could lead to price declines.

Based on these factors, it's possible that the Wyoming housing market could experience a period of slower growth or even modest declines in some areas in 2026. However, a major crash is unlikely unless there is a significant economic downturn or a major shift in market fundamentals.

Will Construction Costs Go Down in 2025: Key Predictions

by

Will construction costs go down in 2025? This is a pressing question for anyone involved in or interested in the construction industry. The answer is likely no—overall construction costs are not expected to decrease significantly in 2025. Instead, they will probably stabilize or rise, influenced by various economic factors, material prices, and labor market conditions. In this blog post, we'll explore the multifaceted elements that contribute to construction costs and what stakeholders can anticipate in the near future.

Will Construction Costs Go Down in 2025?

Key Takeaways

  • Interest Rates: The Federal Reserve's recent rate cuts are expected to stimulate demand and could lead to increased costs in construction.
  • Material Costs: Prices for key construction materials are likely to remain high due to ongoing supply chain issues and demand fluctuations.
  • Labor Shortages: The construction industry faces significant labor shortages, which can drive up costs as companies compete for skilled workers.
  • Sector Trends: Different sectors within construction are growing at various rates, affecting cost dynamics.

Understanding the Economic Landscape Influencing Construction Costs

To grasp whether construction costs will go down in 2025, we must first look at the broader economic landscape. Economic conditions, particularly interest rates, play a pivotal role in shaping the construction market. Following a series of interest rate cuts by the Federal Reserve in late 2024, borrowing costs for homebuyers and builders are set to decrease. As lower mortgage rates begin to encourage more prospective buyers, the residential construction sector is anticipated to heat up.

According to Deloitte's analysis, these economic adjustments will likely spur demand for new builds as more people opt to enter the housing market. However, this increased activity does not come without its downside; heightened demand can cause construction costs to rise as a result of greater competition for materials and labor. Overall, while low interest rates create opportunities, they also present the risk of inflated prices in response to increased market activity.

The Impact of Material Costs on Construction Budgets

One of the most significant boosters of construction costs is material prices, which have fluctuated dramatically in recent years. Essential materials like steel, concrete, and timber have seen wild swings in price due to a myriad of factors including global supply chain disruptions, tariffs, and rising energy costs linked to manufacturing. The JLL's 2025 U.S. Construction Outlook emphasizes that while construction material costs have stabilized at certain points in 2024, an upward trend is projected for 2025 as supply chain issues continue and demand persists.

For example, steel prices remain sensitive to tariffs imposed on imports, as well as the ongoing energy crisis that has affected production costs. Furthermore, the increasing demand for sustainable building materials is also expected to elevate prices. As more builders commit to using eco-friendly and sustainable options, costs associated with sourcing and producing these materials can be higher than traditional options. This creates a situation where construction projects could find themselves burdened with unexpectedly high material expenses.

Exploring Sector-Specific Trends in Construction

While the general outlook for the construction industry may appear daunting, different sectors are showing varying degrees of growth and challenges.

  1. Residential Construction: The residential sector stands on the brink of rapid expansion propelled by lower borrowing costs. As affordability improves for buyers due to falling interest rates, we may witness surging demand for new homes. However, this uptick can lead to increased competition among builders, driving prices up as many rush to meet the heightened demand amidst often limited resources. If costs related to materials and labor continue to climb, homebuilders will likely pass those increases onto consumers, creating a potential bottleneck in affordability in the housing market.
  2. Non-Residential Construction: Contrarily, growth in the non-residential construction sector is projected to slow down to about 2% in 2025. However, individual segments, particularly those related to healthcare and technology, are expected to see considerable growth. Health facilities, data centers, and other high-tech infrastructures are being further propelled by advancements in technology and increasing demands for sustainability. Such specific attention to certain sectors may exacerbate competition for essential materials and labor, contributing to ongoing inflation in costs.
  3. Infrastructure Projects: Government initiatives for infrastructure improvements, such as those outlined in the Infrastructure Investment and Jobs Act, represent another key area of focus. These initiatives are set to stimulate growth, affecting both availability of materials and labor—and, ultimately, pricing. Often, when government funding increases for infrastructure, it can lead to increased demand on existing resources, creating higher costs for all involved in construction projects.

Labor Market Dynamics: The Shortage and Its Costs

A pervasive challenge across the construction industry is the ongoing labor shortage. The deficit of skilled workers has compounded over the years, and as residential and non-residential construction ramps up, this issue is likely to become more pronounced.

The American Institute of Architects has reported varying levels of labor availability by sector, but on the whole, as demand for construction services increases, competition for skilled labor intensifies. Higher demand can mean greater competition for workers, which often leads to wage inflation. Companies may be forced to increase salaries to attract and retain qualified workers, directly impacting overall project expenses. Consequently, any rise in wages is frequently passed along to clients, resulting in increased project costs.

The Role of Supply Chain Issues

The global pandemic exposed just how vulnerable supply chains can be—and this scrutiny continues to shape construction costs today. Material supply disruptions can occur due to transportation delays, international trade complications, or shortages in raw materials due to conflicting demands in different regions. These supply chain challenges significantly impact construction timelines and can elevate costs, further complicating already tight budgets. During the pandemic-induced economic downturn, many suppliers reduced output or scaled back operations, and many have yet to return to previous capacity levels. This lag could persist into 2025, complicating the materials procurement process for construction companies.

Key Predictions for Construction Costs Ahead for 2025

As we project further into 2025, several critical factors will likely come into play.

  • Inflation Trends: Global economic indicators, including inflation rates, will continue to exert pressure on construction costs. With the Federal Reserve's recent cuts in interest rates aimed at stimulating growth, careful attention must be paid to how these cuts may impact inflation, particularly in the context of rising construction demand.
  • Technological Advancements: Revolutionary technologies in construction, such as modular construction, 3D printing, or innovative materials, may offer some buffer against rising costs. These advancements can streamline processes and potentially lower material waste, but initial investments in technology may be required.
  • Sustainability Initiatives: As demand for green building practices continues to rise, construction companies may face increased costs for compliance with new, more stringent or innovative sustainability methods. The adoption of eco-friendly materials can still incur higher upfront costs. However, longer-term savings through energy efficiency may provide counterbalancing value down the line.
  • Local vs. National Trends: It's important to remember that construction cost trends can vary significantly across regions. Local economies, requirements, and availability of materials and labor will directly influence cost dynamics. Therefore, stakeholders should remain mindful of both national and local developments.

In conclusion, while certain indicators—like reducing interest rates—may suggest opportunities for lower construction costs, underlying factors point toward continued inflationary pressures across the sector. In 2025, individuals and companies involved in construction should prepare for a landscape rife with complexities that demand adaptability, strategic planning, and a comprehensive understanding of market forces at play.

Benefits of Investing in New Construction Real Estate in 2025

by

When it comes to investing in residential real estate, there are only two basic types of property you can invest in – new construction and resale. Resale properties are more often than not purchased directly from the homeowner who has been living in it themselves or has been leasing it to tenants. They are typically not purchased from a builder or developer.

New construction properties are those that are purchased directly from the builder or developer who constructed the property. They are the owner and seller. They do not have a residence and have never lived in one before. In short, they are considered brand new. Investing in new construction real estate can provide a number of benefits to investors. They tend to appreciate value faster than older properties, as they are often built in growing areas and offer modern amenities.

Due to their modern amenities and energy-efficient features, new development might attract greater rentals than older residences. Buying a newly constructed home may also provide tax advantages, such as a reduced property tax rate for the first year and the option to claim mortgage interest and property tax deductions.

If your investment focus is on pre-foreclosure, foreclosure, bank-owned property (REOs), or probate sales then you are likely to be purchasing resale properties. Occasionally, however, REOs are new construction properties because the bank foreclosed on the builder or developer who built the property but could not sell it prior to the foreclosure.

Benefits of Investing in New Construction Real Estate

Here are some of the many benefits of investing in new construction real estate: 

Small Deposits

Builders will typically require a very small deposit to secure a contract for a newly built property. Upfront deposits can range from as little as $1,000 to as much as 10% of the purchase price. This is sometimes negotiable and is a major advantage for investors who prefer to minimize their out-of-pocket cash until the actual closing date.

This is true for both new construction and pre-construction real estate where the property is constructed after the acceptance of your purchase contract and deposit.

During real estate booms where there is higher than normal appreciation, a small builder deposit allows some investors to profit by “flipping” or assigning their purchase contract to other investors for a fee. This only makes sense when the second investor is benefiting from the property's equity through discounts and appreciation during construction. This however is not common in today’s market.

Low Maintenance and Repair

New construction properties require less maintenance and repairs than older properties, which can help to keep expenses low. Unlike resale property, new construction property comes with a builder’s warranty which is required by law. Typically, warranties cover materials and workmanship as well as all systems (electrical, plumbing, heating and air conditioning, etc.) for up to two years.

There is also a 10-year warranty covering major structural elements such as the foundation and basement walls. Resale property rarely includes a home warranty unless one was purchased by the seller. However, these warranties carry limitations and are not as extensive as warranties on new construction real estate.

Additionally, resale property that has undergone renovations may not meet current-day building codes. They may be less energy efficient and contain hazardous building materials like asbestos or lead paint.

Growth and Emerging Markets

New construction can always be found in growth and emerging markets. As a real estate investor, this is where you want to invest to reduce your risk and maximize your long-term appreciation. Although you could also invest in resale property in these same growth markets, you would be giving up the other benefits outlined in this article.

As always, be sure to do your research and study the markets you're considering. Purchasing a new property in areas where employment, shopping, and other important amenities are a long commute away may put you too far ahead of the curve and dampen your investments rental prospects.

Appreciation

More than one real estate expert has concluded that, as a whole, new construction properties tend to appreciate at a faster pace than their resale counterparts. As new developments see an increase in residents, retail establishments, schools, and other amenities quickly pop up to service the growing population. This helps increase property values as more residents continue to move into the area adding to the demand and establishing the community.

Discounts and Instant Equity

There are situations where purchasing new construction from a builder in the early stages of development can provide you with early bird pricing or significant discounts. It is not uncommon to purchase property from a builder at 5% to as much as 20% below market value.

Why would the builder sell your property at a discount? One reason is to keep their sales up and debts low in order to be able to attract lender financing so they can build more property. Having buyers lined up to purchase the builder’s product reduces the lender's risk on loans they provide that builder.

Customization and Cost Control

If you are purchasing a pre-construction property you get the added benefit of being able to customize the property to suit your needs. An obvious benefit of buying pre-construction property is that you can choose many of the features such as flooring, cabinetry, lighting, plumbing, and fixtures. This is useful when you want to keep your costs down while making it as durable and appealing to future tenants as possible. You can even choose your lot location in most new subdivisions.

Newer Technology

New construction properties offer better construction and more advanced, longer-lasting building materials than resale properties. Insulation technology is far better than in years past providing better comfort and energy efficiency. Additionally, due to advances in heating and air conditioning systems, indoor air quality is far better.

Overall, newly constructed real estate is better suited as investment property than resale homes. They are simply more energy-efficient, healthier, and lower maintenance. They can be purchased in growth markets using small upfront deposits and often at below-market value. There are no surprises, and that translates into less worry and stress for you.

It's important to note that investing in new construction real estate comes with its own set of challenges, such as dealing with construction delays and unexpected costs. It may also necessitate more upfront capital, but the end result can be a high-demand property with a high return on investment.

Interest Rate Forecast for 2025 and 2026: Expert Insights

by

Money talks, but interest rates scream. As we peer into the economic crystal ball for 2025 and 2026, one number stands out: the Federal Funds Rate. This key benchmark set by the Federal Reserve shapes everything from your mortgage to your savings account. So what's in store? Let's dive into the latest Fed Funds Rate forecast and what it means for your wallet.

Fed Interest Rate Forecast for 2025 and 2026

Fed Funds Rate Forecast
4.0%
Expected rate by the end of 2025
3.8%
Forecast for most of 2026
Key Takeaways:
  • •Fed Funds Rate expected to drop to 4.0% by the end of 2025.
  • •Rate forecast to hold steady at 3.8% for most of 2026.
  • •Gradual decline from current levels indicates a soft economic landing.
  • •Housing market is likely to benefit from lower rates in coming years.

 

Understanding the Fed Funds Rate

Before we jump into the future, let's get on the same page about what we're talking about. The Federal Funds Rate is the interest rate banks charge each other for overnight loans. It's the Fed's main tool for steering the economy. When they want to cool things down, they raise it. When they want to give the economy a boost, they lower it.

The current federal funds rate target range is 4.50% to 4.75%. As of November 19, 2024, the effective federal funds rate was 4.58%. This is lower than the long term average of 4.61%. But the forecast shows some interesting changes on the horizon.

The 2025 Outlook: A Downward Trend

According to the economic outlook data from the National Association of Realtors (NAR), we're in for a steady decline in the Fed Funds Rate throughout 2025. Here's how it breaks down:

  • Q1 2025: 4.2%
  • Q2 2025: 4.0%
  • Q3 2025: 3.8%
  • Q4 2025: 3.8%

That's a drop of nearly a full percentage point over the course of the year. What's driving this? The Fed is likely responding to slowing economic growth. The same forecast shows GDP growth tapering off from 1.8% at the start of 2025 to 2.5% by the end of the year.

Steady as She Goes: The 2026 Fed Funds Rate Forecast

As we look further out to 2026, the crystal ball gets a bit fuzzier, but the NAR data gives us some clues. The Fed Funds Rate is expected to:

  • Hold at 3.8% for the first quarter of 2026
  • Tick up slightly to 4.0% in the second quarter

This relative stability suggests the Fed might feel it's found the “sweet spot” – a rate that keeps inflation in check without putting the brakes on economic growth.

What This Means for You and Me

So we've got a bunch of numbers, but what do they actually mean for regular folks like us? Let's break it down:

  1. Mortgages might get cheaper: As the Fed Funds Rate drops, other interest rates tend to follow. The forecast shows 30-year fixed mortgage rates falling from 6.1% at the end of 2024 to 5.8% by the end of 2025. That could make buying a home more affordable.
  2. Savers might earn less: The flip side of lower rates is that savings accounts and CDs might not pay as much interest. If you're counting on interest income, you might need to rethink your strategy.
  3. Businesses might invest more: Lower borrowing costs could encourage companies to take out loans for new projects or expansion. That could mean more jobs and economic growth.
  4. Your credit card bill might shrink: Credit card interest rates often move in tandem with the Fed Funds Rate. A lower rate could mean smaller interest charges on your balance.

The Housing Market: A Silver Lining?

One area where we might see a big impact is the housing market. The NAR forecast shows some interesting trends:

  • Existing home sales are expected to climb from 4,100,000 in Q4 2024 to 4,600,000 by Q4 2025
  • New home sales are forecasted to jump from 730,000 to 820,000 in the same period
  • Median existing home prices could rise from $398,700 to $405,000

These numbers suggest that the lower interest rates might help thaw out a housing market that's been pretty chilly lately. More affordable mortgages could bring buyers back into the market, driving up sales and prices.

The Big Picture: What's Driving These Changes?

To understand why the Fed might be planning these rate cuts, we need to look at the broader economic picture. The NAR forecast shows:

  • Unemployment ticking up slightly from 4.2% at the end of 2024 to 4.3% by the end of 2025
  • Inflation (as measured by Consumer Prices) dropping from 2.5% to 2.2% over the same period
  • Consumer confidence rebounding from 101.0 to 96.0

These numbers paint a picture of an economy that's cooling off a bit, but not crashing. The Fed's job is to try to engineer a “soft landing” – slowing things down enough to keep inflation in check, but not so much that we tip into a recession. The gradual lowering of rates suggests they're trying to thread that needle.

What Could Change This Forecast?

Of course, economic forecasts are just educated guesses. A lot can happen to throw these predictions off course. Some things that could change the outlook:

  • A major global event (like a war or natural disaster)
  • Unexpected inflation spikes
  • Faster or slower economic growth than predicted
  • Changes in government spending or tax policy

It's always a good idea to take these forecasts with a grain of salt and be prepared for things to change.

The Bottom Line

The Fed Funds Rate forecast for 2025 and 2026 suggests we're in for a period of gradually lower interest rates. This could be good news for borrowers, potentially challenging for savers, and might give a boost to the housing market. But remember, the economy is complex, and a lot can change between now and then.

The best approach? Stay informed, keep an eye on economic news, and be ready to adjust your financial plans as needed. The Fed Funds Rate might seem like a dry topic, but its effects ripple through all of our financial lives. Understanding where it's headed can help you make smarter money moves in the years to come.

Housing Affordability for Renters is Predicted to Improve in 2025

by

Rental housing affordability is predicted to improve in 2025, offering hope for many American renters struggling with high costs today. According to insights from Redfin, the upcoming year will likely see stable rent prices while wages are expected to rise, providing a much-needed break for renters.

Housing Affordability for Renters is Predicted to Improve in 2025

Key Takeaways

  • Rent Prices: Median U.S. asking rents are expected to remain flat year-over-year in 2025.
  • Wage Growth: Due to expected wage increases, rent payments will become more manageable for the average renter.
  • Increased Supply: The housing market will see a rise in new rental units, giving renters more options.
  • Landlord Incentives: As supply outpaces demand, landlords may offer benefits like free months of rent or added amenities.
  • Home Prices Rise: The cost of buying a home is still expected to increase, making renting the preferable choice for many.

Understanding the Current Situation

The rental market has always been a crucial aspect of the broader housing landscape. As of late 2024, renters faced skyrocketing prices that often outpaced wage growth. However, various factors point towards a shift in 2025, where rental affordability is likely to become a more favorable reality. Redfin, a leading real estate brokerage, recently predicted that rental housing affordability will improve significantly in the new year, which could provide relief for many.

One of the primary reasons for this anticipated improvement lies in the supply increase. During the pandemic, many builders paused projects, but now, those delayed construction projects are set to complete. This influx of new rental properties will balance the supply-demand equation. It’s also crucial to note that while many people will choose to rent, this trend arises not only from the affordability of rentals but also due to increasing home prices, which will climb approximately 4% in 2025.

The Role of New Inventory

As more rental units hit the market, renters will benefit from better options. Redfin forecasts that many units that builders embarked upon during the pandemic will finally come to fruition, increasing availability. In a renter's market where the supply grows faster than demand, landlords might have to adjust their practices. They could introduce concessions to attract tenants, such as offering amenities or even incentives like free rent for the first month or waiving certain fees.

This marks a sharp contrast from the past years, where the rental market leaned heavily in favor of landlords. Now, renters might find themselves in a position to negotiate better deals and find more suitable accommodations without the additional burden of steep rent hikes.

Economic Factors at Play

Looking ahead, several economic factors will significantly impact rental prices. As wage growth is expected to rise, Americans will have more disposable income to allocate towards rent. This wage increase will play a vital role in adjusting the percentage of a renter's income that goes towards housing costs.

Redfin emphasizes that while median home-sale prices will increase and mortgage rates will stay high—hovering around 6.8% throughout 2025—many potential buyers will likely opt to remain renters, succumbing to the purchase market's pressures. This shift is pivotal in creating a favorable rental environment because it ensures that demand for rentals stays robust even as purchasing becomes increasingly out of reach.

Potential Risks and Predictions

It's also important to consider potential risks associated with the rental market. According to Redfin, areas at higher risk for natural disasters, such as coastal Florida and parts of California, may see fluctuations in home values, which could indirectly affect rental prices. A decline in buyer interest in disaster-prone areas might lead to lowered home prices, making renting a more attractive option for those who might otherwise consider buying.

Additionally, while 2025 looks promising for renters, unforeseen political or economic changes could impact the broader market, particularly if there are shifts in administration or economic policy that might slow wage growth or inflate housing prices.

Current Market Statistics and Trends

Currently, the average rent in the United States sits around $1,700, though this varies significantly by region. However, the conversations surrounding rental affordability highlight that many Americans feel the pressure of these costs on their budgets. Experts agree that achieving true affordability in housing will require robust solutions, including more units being brought to the market and sustainable wage growth.

The market is clearly shifting, and the prediction that an increase in rentals will lead to better affordability is not just hopeful thinking. Trends indicate that as more rental homes become available and potential buyers remain priced out of the housing market due to rising interest rates and increasing sale prices, the future could hold a more favorable situation for renters overall.

Demographic Shifts in Renting

Interestingly, these changes in the housing market also affect different demographics in unique ways. For instance, Generation Z, who are just beginning to enter the housing market, might find themselves forced to rent longer. With younger individuals being priced out of homeownership, a greater percentage will likely choose to stay in the rental market, thereby increasing demand. However, as developers seek to meet this demand, it should provide the necessary balance to stabilize rental costs.

Another aspect to consider involves the socio-economic implications of these trends. Rental affordability improving presents an opportunity for individuals and families to redirect funds once allocated to housing into other areas of their lives—be it savings, education, or even investments. This broader economic circulation can positively affect local economies by enhancing consumer spending power.

Conclusion

The upcoming year is shaping up to bring significant changes to rental housing affordability, with favorable predictions signaling a shift towards a more manageable renting environment for many Americans. Improvements in rental supply, coupled with expected wage growth, provide a glimmer of hope amid a challenging economic landscape. As we look to 2025, understanding these dynamics will be crucial for renters navigating their choices while seeking the best living arrangements suited to their needs.

Partner with Norada, Your Trusted Source for Turnkey Investment Properties

Discover high-quality, ready-to-rent properties designed to deliver consistent returns. Contact us today to expand your real estate portfolio with confidence.

Reach out to our investment counselors:

(949) 218-6668 | (800) 611-3060

Contact Us Today

Blog Posts

Contact

Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
BBB