Executive Summary:This document synthesizes information from multiple sources to provide an overview of the real estate market and related economic trends in early 2025. Key themes include a stabilizing but still high mortgage rate environment, shifts in population and migration patterns, and varied performance across residential and commercial real estate sectors. The data suggests a complex market landscape with both opportunities and challenges for real estate professionals and consumers.I. Population and Migration TrendsOverall Growth: The US population grew at its highest rate since 2001, primarily driven by international migration, which accounted for 84% of total growth.Birth Rate: While birth rates are declining nationwide, some states saw an increase in 2024, with Idaho and Montana leading with 2.2% growth.Natural Change: Missouri showed significant improvement in natural population change, moving from more deaths than births in 2023 to a natural increase in 2024.Domestic Migration: Texas and the Carolinas experienced significant net domestic migration gains. Utah showed the largest growth with nearly seven times more movers in 2024.Net Migration: Florida and Texas were the leaders in net migration gains.Significance: Domestic migration is seen as a powerful driver of economic and demographic change, providing areas with needed skills and resources. A positive natural change indicates long-term stability and a younger population."Last year, the U.S. population grew at its highest rate since 2001, largely driven by a surge in international migration, which accounted for 84% of the nation’s total population growth." - Behind the Numbers: Top 15 States for Population and Migration Trends in 2024II. Mortgage Rates & Economic FactorsMortgage Rate Stabilization: Mortgage rates have stabilized in the upper-6% range, with the 30-year fixed rate averaging around 6.89% in early February 2025, though some sources report rates closer to 7%.Impact of Tariffs: The recent announcement and subsequent pause of tariffs have created market volatility, impacting treasury yields, but not significantly affecting mortgage rates. As Zillow notes, "mortgage rates did not follow suit" the declines in treasury yields.Jobs Report: A weaker than expected January jobs report (143,000 nonfarm payroll jobs) has dampened hopes for an immediate Federal Reserve interest rate cut.Future Rate Expectations: There are varied predictions for interest rates in the short-term. Some experts predict mortgage rates to moderate, while others foresee a slight increase. However, the majority seem to agree that rates will likely remain near 7% until there's significant data showing slower job growth, lower inflation, or changes in fiscal policy.Consumer Sentiment: There is a mixed consumer sentiment with some "positive sentiment" from the new administration as mentioned by Danielle Hale, but no major changes are expected immediately.Rate Lock-in Effect: A higher percentage of homeowners now have mortgage rates above 6%, suggesting the “interest rate lock-in effect may be easing” as reported by “Mortgage rates dip, but demand still weak”.Latent Demand: Despite higher rates compared to last year, there is some latent demand in the market, as seen in purchase applications which are "modestly above what we saw a year ago," according to Sam Khater, Freddie Mac’s chief economist.Forecasts: 2025 Q1 average 30-year fixed mortgage rates vary from 6% (NAR) to 7.1% (Wells Fargo) - indicating the uncertainty in future rate trends."Mortgage rates have been stable over the last month and incoming data suggest the economy remains on firm footing." - Will Interest Rates Go Down in February? | Predictions 2025"The 10-year treasury moved lower over the last couple of weeks, which allowed mortgage rates to fall as well."* - Mortgage Rates Continue Edging DownwardIII. Residential Real Estate MarketHome Price Appreciation: While many metro areas experienced home price gains in the fourth quarter of 2024, the pace of appreciation has slowed.Price Reductions: An increasing percentage of homes are seeing price reductions, a trend that is unusual for this time of year and suggests weakness in buyer demand. 33.1% of homes have taken price cuts, up from 33% the week prior and even higher than 2023, “a prett(y) small move but in the wrong direction” according to housingwire.com. This is the first uptick in price reductions in January in over 10 years according to a HousingWire.com video.Regional Differences: The Midwest saw significant home price gains, with some metro areas experiencing increases of at least 14.9%. In contrast, many of the most expensive markets remained in California.Affordability: First-time buyers are facing slightly better affordability compared to the previous quarter, but still spend over 37% of their family income on mortgage payments. A significant percentage of markets require an income of $100k+ to afford a home with 10% ...
