What happened in 2024 and What's to Come in 2025?

The housing market in 2024 has been nothing short of transformative, marked by significant shifts in buyer demographics, mortgage rates, and broader economic dynamics. Here’s a breakdown of what shaped the market this year and what we can expect as we move into 2025.

The Aging and Wealthier Housing Market

2024 saw the average homebuyer’s age hit a record-high of 56 years, up from 46 years in 2023. First-time homebuyers also experienced an increase, with the average age rising from 35 to 38 years old. This reflects a growing trend: younger generations are finding it increasingly difficult to break into homeownership.

The challenges for first-time buyers are highlighted by their dwindling share of the market:

• Only 24% of buyers were first-time homebuyers this year, the lowest percentage on record.
  
• Conversely, 26% of all home purchases were made with cash, another record, showcasing the dominance of wealthier, equity-rich buyers.
  

Older homeowners are benefiting from price appreciation and high equity, while younger buyers face a competitive market, elevated mortgage rates, and limited inventory.

Mortgage Rates and Treasury Yields: A Tale of Declines

​Mortgage rates, closely tied to the 10-year Treasury yield, have finally shown signs of relief after a year of volatility. The 30-year fixed mortgage rate recently dropped to 6.68%, the lowest level in over six weeks, driven by:

• ​A weaker-than-expected jobs report and ISM Services data.
  
• Improved mortgage spreads and cautious lender pricing.
  

These trends are promising for buyers waiting for rates to stabilize, especially as forecasts suggest rates could fall further in 2025, ranging between 5.75% and 7.25%.

2025 Housing Market Predictions

​Looking ahead, the 2025 housing market is shaping up to be one of stabilization and gradual recovery:

• ​Home Prices: Expected to grow between +1.5% and +4.9%, with Wells Fargo projecting the highest increase.
  
• Home Sales: Predicted to range from 4.07 million (Realtor.com) to 4.47 million (NAR), reflecting optimism despite affordability concerns.
  
• Inventory Growth: Analysts anticipate modest gains, with forecasts ranging from 11.7% to 13% growth in available homes.
  

The Bigger Picture

Despite economic challenges, including higher rates and affordability issues, the housing market remains resilient. Increased wealth among older homeowners and a sharp decline in first-time buyers have fundamentally reshaped the market. As we move into 2025, a cooling labor market, falling Treasury yields, and more stable mortgage rates could provide relief for aspiring homeowners.

The big question is: will first-time buyers regain their footing, or will the market continue to cater to older, wealthier buyers?