T
he housing market has been behaving unpredictably in recent years, defying traditional forecasts based on economic and social conditions. The past few years have seen ever-escalating home prices that seem immune to fluctuations in mortgage rates or inventory. This unusual trend is expected to continue into 2025.

    According to the T3 Sixty's 2025 Trends Report, five key factors will shape the housing market in the coming years: shifting market fundamentals, economic conditions, demographics, regulatory factors, and consumer behavior. However, these traditional fundamental factors have not operated as expected in recent years, making it challenging for analysts to forecast the market.

    Economic data remains positive, but the housing market's performance may reflect consumers' perceptions of the economy rather than actual economic indicators. Increased savings from Covid-19 initiatives and record levels of housing equity have made some homebuyers less sensitive to inflation pressures and elevated mortgage rates. Housing affordability is at an all-time low, making it difficult for first-time buyers to enter the market.

    Demographic changes are also affecting the housing market. Baby boomers are staying in their homes longer due to a lack of suitable alternatives, while millennials are delaying or skipping milestones that typically drive first-time homebuying. Regulatory factors, such as zoning and land use policies, may influence new housing development in the future.

    The National Association of Realtors' (NAR) settlement related to compensation policy has introduced uncertainty among real estate professionals and consumers. This change may lead to more buyers going without representation or limiting their home search. The removal of compensation-sharing information from the MLS could also impact market data collection.

    To better understand this unusual market, analysts should focus on the following factors: housing affordability, income and homebuying costs, consumer perception, U.S. Treasury bonds, and homeowner age and equity.