The earliest calculations are showing that homes appreciated at 4.5% over the 12 months ending December 31, 2024. This is unsurprising despite the number of people who thought prices would drop last year. I believe we’ll see home values continue upward another 4.25% in 2025.
Wages rose 4.3% during 2024 which is remarkably close to the home price increase. Considering that property values have outpaced wages almost 2:1 over the last 50 years, the increase in worker pay really makes homes relatively affordable moving forward.
Speaking of jobs, we’ll see the Unemployment Rate issued on Friday. That report will be the key to the future of interest rates. The current 4.2% is expected to ratchet up to 4.3%, and then on to 4.6% by year end. As that rises, the Fed will cut their key rates. Consensus among the FOMC members currently calls for a 1/2% cut to 3.875% on their overnight rate. I hope we’ll see three or four cuts this year sending mortgage rates down to 5.75% by the end of the year. We were there just a few months ago so it’s not that much of a stretch to get back down.
