2025 Housing Market Conditions
The Housing Problem
The housing industry is a huge part of our national economy, and home ownership is one of the top ways that most families accumulate wealth over time. Hamlet Homes was founded in 1995, so this year marks 30 years of our proud history serving homebuyers, and our team has many decades of experience in our industry, including some of the top industry experts. So why are we optimistic about housing in 2025?
National housing experts estimate that the housing industry’s combined contribution to GDP averages 15-18% of our $27 trillion national economy. This is an important industry.
The U.S. Census Bureau estimates that 36.4% of U.S. household wealth is in home equity, rental properties, or other real estate. This is more than the 34% saved in retirement accounts.
As a nation, we have been underbuilding housing for more than a decade. Between 2010-2020, the number of households in the U.S. increased by 10 million, while the number of homes built was only 9.9 million, and 2-3 million homes were demolished due to obsolescence or for alternative uses. According to J.P. Morgan, this has left our nation with U.S. housing stock falling short of demand by an average of 300,000 homes annually for the last 15 years. This under-supply condition cannot be corrected in months, but rather will take years, making housing a good long-term investment.
Mortgage rates play a big part in housing affordability. For two years post-Covid, mortgage rates were in the 2.5-3.5% range, and for the past 3 years since spring 2022, mostly in the 6-8% range. After 3 years of these conditions, most people now recognize that 3% mortgage rates were abnormal, and likely will not be seen again in our lifetimes. The average 30-year mortgage rate from 1971-2025 has been 7.72%. As more Americans accept that current mortgage rates are relatively normal, additional pent-up demand is expected to come to market this year.
The number of young adults (age 20-39) still living at home with parents reached a peak of 24% in 2020, and that number is trending down, projected by industry experts to be 21% by 2030. These young adults moving away from home will continue to increase demand for housing.
Housing affordability is currently at very low levels due to many factors, limiting demand for new homes. 74% of mortgages today are below 5% (56% are <4%), with borrowers who don’t want to give them up, limiting supply of homes for sale. This has us in an unusual market with both low demand and low supply. Low demand is limiting sellers’ ability to raise prices, while low supply is ensuring sellers do not have to reduce prices. As a result, experts in the housing market predict home prices will slowly increase at 2-4% each of the next few years. If these expert predictions are correct, and you are renting today, it is better to purchase a home now, if you can afford it, rather than waiting 1-3 years for higher prices without having built up equity during the wait.
If you are in the right states, population growth is expected to continue. In Utah and Idaho, the two states where Hamlet Homes builds, our above average birthrates and in-migration contribute to demand for housing. Idaho is #4 and Utah is #9 of our 50 states for percent population growth.
Utah Buyers
For all these reasons, we remain optimistic about the housing market in 2025, and especially over the long-term, as one of the greatest wealth building opportunities for most Americans. We do consider ourselves experts in the housing market, and among the best homebuilders in Utah and Idaho. We are excited about celebrating our 30 years of building great homes for our customers.