Market Trends
Market Trends
With the year so newly begun, emerging trends are just trickling in. At the moment, we have to look back to look forward. Let’s begin with some interesting trends 2025 established according to the Cromford Report:
Condo/apt style vs single family
“First we note that apartment-style homes sold in lower volumes. A drop of 12% compared with the year before, whereas single-family detached homes sold 5% more. This is an unusually strong swing away from a specific dwelling type”.
There are likely reasons that the market has shifted away from apartment style properties. First when supply rises, buyers given a choice will typically pick single family (privacy and space being prioritized) over multifamily. Second, financing is typically more limited (FHA/VA do not lend on many complexes) and lenders often require larger down payments (often 20%). Third, insurance is increasingly becoming more difficult and expensive to obtain in large complexes and building standards are being scrutinized. Some lenders will not accept the level of insurance that the HOA has obtained. Fourth, while sales prices are typically lower for condos and townhomes, the monthly payment can be higher giving the insurance, HOA fees, assessments etc. All of these limit the pool of buyers.
Foreclosures
“Secondly, there has been a major rise in completed foreclosures, almost doubling compared with the year before. Those of an alarmist persuasion could focus on this fact, but the volumes are still tiny and not even back to what we would consider normal yet. They are heading in that direction though.”
Is this a point of concern? Not really, at least not at this time. As the Report points out the volumes are still small and below normal. That they would grow is predictable – mainly due to pricing not increasing. When sellers have no equity – they are more likely to foreclose as they cannot sell without paying to sell. Rising prices cover a multitude of sins, and sellers that experience a setback or adversity have the equity that makes selling possible and preferable to foreclosing.
Resale homes vs new build
“Thirdly, we see a swing in favor of re-sales and away from new homes. New homes went down 9% while re-sales rose 2%.” This is a notable reversal since new homes in 2024 were about a quarter of the market. We can only speculate as to why this shift has happened. Resales tend to favor the inner urban areas, while new builds have to go where there is available raw land in outer city areas. Also the cost of commodities and land have risen leading to increased cost of new builds – allowing resales to better compete on price.
Interest rates
Interest rates have a strong impact on sub-luxury market demand. But for an insightful look at them, the Cromford Report shares this:
“The market is not very different from this time last year overall, especially with regard to prices. But mortgage interest rates have come down a lot. The typical 30-year fixed mortgage is at 6.19%, down from 7.06% a year ago, which is a drop of 87 basis points and a percentage drop of 12.3%. Those who focus on interest rates as a driver of the real estate market will have to explain why we seeing only a small change in market conditions after a large change in interest rates….
Of course, there are many more factors driving demand than just interest rates, but the other factors are far more difficult to measure, so economists tend to vastly exaggerate the impact of interest rates. Other factors which could possibly be influencing buyers include: homes becoming cheaper in real terms (after adjusting for inflation) is a situation that motivates some buyers to wait and see if they get cheaper still; mortgage rates going down can also lead potential buyers to wait and see if they get cheaper still; current talk by industry leaders about AI eliminating large numbers of jobs, despite studies showing widespread lack of actual productivity gains from businesses implementing AI, can make some buyers nervous about the security of their employment. Buying a house in this situation can seem risky compared with the option of renting, as the cost of changing your mind a year or two later is much higher than terminating a lease.
In summary, the market is looking stronger than last year in many respects, but not as much as we would have expected given the state of the mortgage market.”
Pricing
As so often happens, pricing doesn’t move in tandem across all price points. The luxury market has benefited from the stock market and crypto gains funding gains in the luxury housing market. The sub luxury market has not seen the same benefits. As the Cromford Report shares:
“While sales are expected to increase, prices are not. Price is the last measure to move when a market shifts, and it can take up to 3-6 months to emerge. Price appreciation remains stagnant in the middle price ranges, rising in upper ranges, and declining under $400K. Greater Phoenix is pulling out of a buyer’s market and edging towards a balanced state, but a seller’s market isn’t on the horizon.”
Summary
At the moment, we see the market moving towards balance. But as explained above, many trends take time to establish. As the evidence continues to mount as to the market direction, as always we will keep you apprised here first.
Russell & Wendy Shaw
(Mostly Wendy)