The Prediction Edition 🧪

In today’s edition:

• Mortgage rates will be boring
• Existing home sales should tick up
• More consolidation in SFR

🎯 What’s Stirring

I love the new year. I love that new year energy. I like determining my word of the year, writing down my goals, picking one thing to improve on, and trying to hold my ground while inevitably getting dragged into the infinite abyss of the inbox.

I also like reading the big, bold predictions that come out this time of year. So, in this edition, we will look at a consolidated list of predictions for easy reference when December 2025 comes along.

• The Fed signals a plan to slow down rate cuts in 2025, with analysts predicting only two rate cuts for the year - down from previous estimates of four or more. Since September, the interest rate has come down a full percentage point and inflation has proven to be relatively sticky, with core prices increasing 2.8% in the 12 months ending in October. The latest cut brought the federal-funds rate between 4.25% and 4.5%, a two-year low. Now, most officials see the rates holding steady for at least the next two Fed meetings, if not more.
• Zillow predicts slow, modest growth in home prices in their 2025 Housing Forecast. They are forecasting home value growth of 2.6%, which is on par with the growth in 2024. Zillow also forecasts existing home sales of 4.3 million in 2025, compared to 4.1 million in 2023 and 4 million in 2024. Overall inventory has shown steady improvement throughout 2024, and that trend is expected to continue, resulting in more “room to breathe” for buyers, according to Skylar Olsen (Chief Economist, Zillow).
• Buildium offers 14 rental market predictions for 2025 in a recent blog post. Things that will persist? Demand for rentals, affordability challenges, moving rates will remain low, and labor shortages will keep maintenance costs high. What will feel new? Apartment construction will slow down, tenant screening and tenant quality will get much more attention, moving to the Sun Belt will slow down, rental owners will become increasingly interested in acquiring more properties, and loosened zoning restrictions will allow for more housing production.
• RISMedia put together a summary of predictions from economists and housing publications in a recent article. Mortgage rates are expected to settle at the low 6% mark by the end of the year, NAR expects existing home sales to increase by 9% while Realtor.com expects the number to be closer to 1.5%, CoreLogic expects home values to increase by 2.4% compared to the current rate of 3.4%, and single-family construction starts are expected to reach 1.05 million - an increase of 7.5% over 2024. Other things to watch are how immigration policies may impact labor for new construction and a possible decline in real estate commissions in 2025 in the wake of the NAR settlement.
• GlobeSt published an analysis of CBRE’s market outlook for 2025. The notable sentiment in the outlook was “cautious optimism” for investors. The report predicts some cap rate compression in 2025, falling slowly until “stabilizing at higher levels than in the last cycle”. Construction loans will remain hard to get, and investors in distressed sectors like office and multifamily could see unique opportunities due to low asset pricing. On a related note, the office sector is expected to see a delinquency of 14% by the end of 2025, up from 11% in November 2024.
• Invitation Homes and AMH received an “outperform” rating in a 2025 outlook done by Raymond James and Associates. The single-family rental industry will continue to benefit from increased housing prices and “higher for longer” mortgage rates. Build for rent construction is a key trend to keep an eye on: “In the third quarter, builders broke ground on about 24,000 single-family homes slated to become rentals. That’s up from 17,000 a year earlier. In the second quarter, single-family rental starts climbed to 25,000, the highest quarterly total going back to at least 1990” (APNews). And speaking of Invitation Homes, here is Dallas Tanner with his 2025 housing outlook.
• What about AI? This is not housing-related, but The Neuron does a great job with AI news and updates. That blog post is definitely worth the read. If you just don’t have it in you to click the link, here you go: What does the future of AI hold? Agents (AI systems can actually do things for us on our computers), Reasoning (beyond “pattern matching” into logical thinking), and in the future: self-awareness. And once that happens we will officially be living in the “future”...

📰 SFR In The News

Everyone knows this stuff and you should too

• Evernest acquires property management division of Picket Homes
• Second Avenue acquires Pacific Oak Residential, adding 2,110 homes to its portfolio
• EasyKnock shuts down business
• Casago acquires Vacasa, and Roofstock invests in combined company

The Beaker is a bi-weekly briefing from PlanOmatic on the economy, housing, and the forces shaping both. Have something we should cover? Reply to this email.

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