America’s real estate market appears set for a fascinating 2025 after new home sales finished strongly in December and pointed to a building confidence among buyers.
We had hoped the Federal Reserve would step in to reduce the cash rate by a further 0.25% at the end of last month to ease the mortgage burden and give buyers more spending power.
Instead, the Fed left the rate in the 4.25%-4.5% range, citing continuing economic strength and growing employment numbers. That’s left our retail mortgage rate at around 6.5% to 7%.
The story of mortgage costs is far from finished, however. The President has demanded that the Fed reduce the rate. And while the central bank doesn’t need to do as it’s told, the political pressure is only going to increase.
If you’re looking for guidance on what 2025 will hold for real estate, it’s fair to predict a sustainable price recovery across America. Lower interest rates are also a probability.
The December figures for the sale of brand new homes are a solid indicator of the market mood right now.
They increased 3.6%, according to the Department of Commerce. Some 683,000 new homes were sold in 2024, up 2.5% from 2023. The median price is 2.1% higher at $427,000.
We’re also enjoying a 10-month peak in permits for single-family housing starts and building permits.
Fannie Mae predicts faster growth in new home sales this year, saying they were “now priced competitively with existing homes and are far more available”.
In real estate circles, it’s well known that builders are now constructing smaller and more affordable homes to woo first-time buyers and investors.
We now have the highest inventory of unsold new homes – 494,000 – since December 2007.
Here are some essential tips for buyers inspecting a new home.
Don’t Assume Perfection: Even in new homes, things can be overlooked.
Test everything: Turn on faucets, flush toilets, open and close doors and windows, and test appliances.
Dig into the Detail: Check for proper sealing, caulking, and finishing.
Document everything: Take photos and videos of any concerns.
Check for proper installation: Pay close attention to the installation of fixtures, appliances, and systems. New homes should have everything installed correctly.
Inspect the exterior: Check for proper grading, drainage and landscaping.
Focus on finishes: New homes should have flawless finishes. Look for any imperfections in paint, flooring and trim.
Verify compliance with building codes: New homes must meet current building codes. Ask for documentation.
Review warranties and guarantees: Understand the warranties provided by the builder and manufacturers.
Use a Professional: If you’re still interested in the home, contract a professional home inspector before committing to a purchase. If you need a mortgage, your lender will probably insist on a professional inspection.