Real Estate News
Feel like housing forecasts have been off lately? That’s because the market hasn’t been behaving as expected. See which factors are playing a bigger role.
Editor’s note: Since 2006, the Swanepoel Trends Report has provided in-depth research and analysis to help leaders understand the forces shaping residential real estate. This exclusive series of excerpts highlights each trend featured in the 2025 report, which was released in November 2024.
5 Housing Market Factors to Monitor in 2025: The unusual circumstances of the past few years, including ever-escalating home prices that seem immune to fluctuations in mortgage rates or inventory, have altered the historically predictable relationship between the housing market and broader economic and social conditions.
The following excerpt, taken from T3 Sixty’s 2025 Trends Report, looks at the factors traditionally used to forecast market trends, and lists the five to focus on in the years ahead.
Shifting market fundamentals
The last few years have been unusual by historical standards; 2025 presents an uncertain and challenging housing market. The way people live and work is still adjusting in a post-pandemic world. Housing affordability is at its lowest level on record. Economic conditions are beginning to soften, just as a new presidential administration will bring political uncertainties.
The NAR settlement related to compensation policy and practices has also brought real estate industry changes and created, at least in the short-term, confusion and uncertainty among real estate professionals and consumers alike.
This means that the long-term fundamental factors analysts have relied on to evaluate and forecast the housing market will be less helpful over 2025 and into 2026.
Overview of long-term fundamentals
Economic factors
- Data on the U.S. economy is still positive at the end of 2024, but the performance of the housing market might reflect more how consumers feel about the economy.
- Increased savings from Covid-19 initiatives and record levels of housing equity have changed the calculus for some homebuyers, particularly repeat buyers, making them less sensitive to inflation pressures and elevated mortgage rates.
- With housing affordability at record lows, small declines in mortgage rates may not be enough to entice an influx of first-time homebuyers into the market.
- Record home price appreciation may price out a big segment of the homebuying population.
Demographics
- Boomers are staying in their homes longer, often citing a lack of another home to move into, which leads to even tighter inventory.
- Millennials are delaying or skipping altogether milestones that customarily drives first-time homebuying (e.g., getting married and having children).
Regulatory factors
- State and federal policymakers have turned their attention to zoning and land use policy.
- Regulations constraining new housing development could be reduced in the future, though it will take time for any changes to lead to more new housing.
The fundamental factors of economics, demographics and regulation as presented above still matter immensely. Yet in recent years they have not operated as expected. This means analysts cannot necessarily use traditional fundamentals to forecast where the housing market is headed. Nor can they defer to historical patterns that have shaped the housing market over the past five decades.
As a result, the current unusual state of the housing market presents an opportunity to rethink how we forecast and analyze. It will also influence the conversations real estate professionals have with potential clients.
It will be some time before analysts understand the impact of the changes brought about by NAR’s March 2024 settlement. However, it is very likely that more buyers will go without representation. Others will limit their home search or make compromises to ensure they can compensate their agent.
Further, removing compensation-sharing information from the MLS may lead some brokers to prefer private listings to using the MLS. If a large proportion of listings get marketed outside of the MLS, comprehensive market data will be more difficult — if not impossible — to obtain.
Outside of the NAR settlement changes, attempts to understand this unusual market and recalibrate expectations could benefit from looking at the following factors:
- Housing affordability
- Income and homebuying cost
- Consumer perception
- U.S. Treasury bonds
- Homeowner age and equity