02/03/2025
Even the Darkest Clouds Have Silver Linings
With the cost of home ownership skyrocketing and 2024 home sales at the lowest level in 30 years it is hard to imagine that 2025 could be even worse. Yet here it is in black and white. Fanniemae has released its 2025 forecast, and the outlook is bleak. Treasury yields are expected to top 5% keeping mortgage rates well over 6% and decelerating appreciation of home equity. Furthermore, higher treasury yields are expected to result in large investment capital being parked in treasury bonds leaving less capital available for lending in the mortgage market. All the while there appears to be no relief on the horizon for the stagflation nightmare that we have been entrapped in. In short there is going to be less money available and what little money that is out there will be less valuable and more expensive. Bleak indeed. As bad as it sounds it is not time to abandon all hope. We have not yet crossed the threshold into the inferno. There are some silver linings.
Depreciation does hurt the position of existing home owners and limits their options for the short term, but it also means some much needed price relief for first time buyers. One of the lessons learned from the last stagflation nightmare is that even in hard times life doesn’t stop. People grow up, get married, have kids and move to career opportunities. My message to those young people coming of age in this vexing housing market is that these dark clouds will bring the rain to irrigate the seeds of future value that you plant now. There will be deals to be had. So get ready, prepare now, and then you will be in a good position to move when the opportunity presents itself.
There is another beacon of hope glimmering in the darkness. These market conditions have restored the long beleaguered VA loan buyer to a position of power and leaves them poised to be in the driver’s seat in a more buyer-centric market. The seller dominated market of the last couple of years has left many VA buyers on the sidelines unable to compete in a market dominated by skyrocketing prices and fierce competition between potential buyers. Now as market conditions shift to a position where mortgage financing is less available and more expensive, the VA buyer, with their guaranteed mortgage benefit, will be very attractive to nervous sellers who will see their listings sit on the market longer and longer while only drawing offers below asking price. My message to VA buyers is that your time has come!
The future is uncertain, but no matter what comes to pass one thing remains constant. People need a place to live. The On Point Real Estate Team is here to lead you through the minefield that is today’s financial world and complete the mission of helping you realize the dream that is owning your own home.
The recent jump in the 10-year Treasury yield and the resulting rise in mortgage rates are expected to continue to weigh on existing home sales in the near future, likely keeping them at or near their lowest level since 1995, according to the January 2025 commentary from the Fannie Mae Economic and....
