Housing Predictions 2025 by Warren Buffett’s Berkshire Hathaway

Are you wondering what will happen with housing in 2025, especially if you're thinking about buying or selling? According to insights from Berkshire Hathaway HomeServices (BHHS), don't expect any drastic changes. The prediction is that existing home supplies for sale will increase by 11.7% over 2024, with mortgage rates sticking around the 6.5% range. It is also predicted that home prices will increase in 2025 at a pace of 3.7%. But let's dive deeper because, as someone who's been watching the market closely, I know it's way more nuanced than just a few numbers.

Housing Predictions for 2025 by Warren Buffett's Berkshire Hathaway

When a name like Warren Buffett's Berkshire Hathaway gets thrown into the mix, people listen. Berkshire Hathaway HomeServices (BHHS) has a good idea of what’s happening on the ground. Their insights, based on market data and expert analysis, can give us a clearer picture of what to expect. I'm talking about understanding the key factors that will influence the housing market in 2025.

The Mortgage Rate Maze: Are We Stuck?

One of the biggest roadblocks right now? Mortgage rates. Remember the ridiculously low rates during the pandemic? Well, those days are gone. In 2024, mortgage rates lingered around 6.85%, which is a big jump from what many homeowners were hoping for.

• The Lock-In Effect: This is what happens when people with super-low mortgage rates (think 3% or less) decide to stay put. Why would they sell and take on a new mortgage at double the rate? This keeps homes off the market, tightening supply and pushing prices up.
• Hope on the Horizon?: The good news is that experts are predicting a slight decrease in mortgage rates in 2025. Even a small dip can make a difference. According to Lawrence Yun, Chief Economist for the National Association of REALTORS® (NAR), a 0.5% drop could save you around $150 each month. That's money back in your pocket!

Here's a quick rundown of what different experts are predicting for mortgage rates in 2025:

Source	Prediction
Mortgage Bankers Association	Sticking to the 6.5% range
Realtor.com	Average 6.3%, ending the year at 6.2%
Fannie Mae	Decline but remain above 6%

More Homes on the Market? Maybe…

Even with higher rates, there's reason to believe more homes will become available.

• Life Happens: People move for all sorts of reasons – new jobs, bigger families, divorce, or even just a change of scenery. These life events will push some homeowners to sell, regardless of interest rates.
• Inventory is Improving: By late 2024, the housing inventory increased to a 4.2-month supply. This is up from 2.9 months earlier in the year. While it is still below a balanced market which requires 6 months’ supply, it is a step in the right direction.

New Homes to the Rescue? Don't Get Your Hopes Too High

Homebuilders are trying to step up their game and address the housing shortage.

• A Big Shortage: Experts estimate we're short millions of homes in the US. Freddie Mac puts the number at 3.8 million!
• More Construction: Builders are planning to construct approximately 1.1 million homes in 2025, which is a 13.8% increase from 2024.
• Smaller Homes: To make things more affordable, builders might start building smaller homes. We are looking back to the 1980s, when rates were very high.
• Challenges Remain: They are still facing high material costs, strict zoning laws, labor shortages, and higher borrowing costs.

Will People Still Want to Buy? It's Complicated

Even though rates are higher than many would like, people still want to buy homes.

• Changing Expectations: Many people were hoping for rates below 6% or even 5%. The reality of the market is that this may not happen any time soon.
• Pending Sales Increase: Despite this, pending home sales rose four months in a row through November 2024, especially in the South where jobs are more available.

What About Home Prices?

Here's the thing: even though demand is still high, home prices are expected to keep rising.

• Slower Growth: Realtor.com predicts home prices will increase 3.7% in 2025.
• Still Expensive: NAR predicts the median existing home sale price to be $410,700 in 2025.
• Sales Volume Up: Sales volume is forecast to be 1.5% higher than in 2024.

The Trump Factor: A Wild Card

With the presidential election decided, there’s a big question mark hanging over the market. Trump's policies could shake things up in unpredictable ways.

• Regulation Cuts: Trump wants to reduce regulations, which could make it easier and cheaper to build new homes.
• Tariffs and Immigration: His policies on tariffs and immigration could increase construction costs and reduce the availability of labor. This may impact home prices.
• Economic Growth: Trump wants to increase economic growth and cut government spending, which could lower mortgage rates.

My Take on the 2025 Housing Market

After looking at the data and considering the overall economic situation, here's what I think:

• Rates Will Stay Elevated: While we might see slight dips, don't expect a return to the ultra-low rates of the pandemic era. The Federal Reserve is trying to balance inflation and economic growth, and that means rates will likely stay in the 6% range for a while.
• Supply Will Improve Slowly: We'll see more homes come on the market, but not enough to drastically change the market. The lock-in effect will continue to play a role, and builders will face ongoing challenges.
• Prices Will Keep Rising: Demand is still high enough to keep pushing prices up, though the pace of growth will slow down.
• Location Matters: The housing market is local. What's happening in Texas might be different from what's happening in California.

What Does This Mean for You?

• If You're a Buyer: Be prepared to pay more. Shop around for the best mortgage rates, and consider smaller homes or homes in up-and-coming neighborhoods.
• If You're a Seller: Now might be a good time to sell, as prices are still high. However, be realistic about your expectations and don't overprice your home.
• Everyone: Stay informed. The housing market is constantly changing, so keep an eye on the latest news and trends. Talk to a real estate agent or financial advisor to get personalized advice.

In Conclusion

The housing market in 2025 will likely be a mixed bag. While there is a hope for improved supply and slightly lower mortgage rates, affordability will continue to be a major challenge for many people. But being informed, understanding the trends, and making smart decisions, you can navigate the market successfully.