What the Housing Industry Needs in 2025

It’s now half a decade since anything in the US housing market could be considered normal. The pandemic boom was followed by a transaction bust, induced by the central bank, that did little to lower sky-high prices. Going into 2025, a lack of affordability continues to sideline buyers, while potential sellers feel stuck in place, tied down by Covid-era mortgages. The slump in transactions has hurt real estate agents, lenders and furniture companies. Homebuilders, until now somewhat insulated from the housing blues, are beginning to feel pressured by a buildup in inventory, and multi-family landlords, by a rise in vacancy rates. Lower mortgage rates should help, but there’s little indication of that happening soon and some signs that borrowing costs may get worse before they get better.

Businesses and investors have largely cheered the news of Donald Trump’s return to the White House with a pro-growth agenda of tax cuts and deregulation. Stocks tied to the housing industry haven’t shared the enthusiasm. The iShares US Home Construction exchange-traded fund has slumped about 15% since Election Day, partly because of a surge in 10-year US Treasury yields. What the housing industry needs more than anything else in the new year is lower mortgage rates. Lower taxes and cutting red tape just won’t move the needle as much as home buyers seeing 5.50% home-loan rates again. That would make what’s currently an unaffordable market seem within reach once more, unfreezing transactions of both existing and new houses.