Yes, there are actually some winners.
I recently gave a 2025 Forecast on what I see happening in the real estate market this year at our Smarter Hour event. If you missed it, I’ll be doing a quick recap on our monthly market update called Property Pursuits next week. You can join us live or catch the recording wherever you listen to podcasts. There are some interesting trends you’ll want to pay attention in terms of AI’s impact on the housing shortage, the new wealth effect and specifically how it will impact 18-29 year olds and of course interest rates.
Spoiler Alert – They are expected to remain in the 6’s throughout this year.
The Fed has forecasted a slower pace of cuts on their Fed Funds rate. We have an inflationary president taking office. And, the labor market has not slowed – or at least the data used to measure it hasn’t. So how does one navigate this era of limited inventory, stabilized but higher home prices than we’d like to see and less than inviting borrowing costs?
We’ll dive into some specific tips for homebuyers and sellers on Property Pursuits Wednesday. For now, I want to highlight who I predict will be the winners in this type of marketplace.
Savers
High interest rates sounds bad all around but they definitely are not bad news for high yield savings accounts, money market funds, CDs. While borrowing costs are at their highest level in 22 years, that mean savings returns are looking pretty damn good. This means if you can save any sum of money and save it in the right place, your efforts will be rewarded generously. For reference, in 202 you would get half a percent return on your savings whereas now you can find a high yield savings account paying YOU an interest rate between 4 and 5%. I recommend SoFi. Online banks will pay better returns that your brick and mortar, BofA type bank.
Savvy Sellers
This trend will continue from 2024 where we saw homes that weren’t prepared properly to be listed sitting while others went into escrow within days of hitting the market, often after a bidding war amongst several interested buyers. Sellers should understand where to focus their efforts when it comes to preparing the house for listing, from repairs and upgrades to pricing. Of course a good realtor guides their clients through this. I also read an interesting article in the Wall Street Journal this morning about which home investments return the most value.
The second or third-time Homebuyer.
Those move up and even those moving down, or downsizing I should say, have an obvious upper hand in this market. They are less freaked out by a higher interest rate because they are familiar with a few key points:
You will rarely think about your interest rate post closing, you just need a monthly payment strategy that works for your budget.
Refinances are mostly painless and quite common.
Buying a home will not ruin your social life.
The main advantage all of these buyers have is that they are also sellers, leaving with a significant amount of proceeds to put down on the next home. While our team helped a ton of first time homebuyers in 2024, the second largest demographic of buyers were move up buyers using their equity to buy their “forever home.”
Coming up on Valentines Day, Friday February 14th we have Mortgage and Mimosas. You can now also grab an early bird ticket or table sponsorship to the Future is Female on March 6th. We are doing a very special spinoff this spring. We are expanding our mission to Empower Women as Real Estate Investors and for this event will be empowering women in WELLNESS. It’s going to be very special and definitely impactful as we discuss health on a physical and mental level in addition to financial wellness. You’ll want to invite all your besties this time.
Happy New Year!