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New Home Sales Poised for up to 50% Growth in 2025

Theodore QuinnMonday, Jan 20, 2025 7:46 pm ET

1min read

The housing market is expected to experience a significant boost in new home sales in 2025, with projections indicating a potential increase of up to 50% compared to 2024. This growth is driven by several factors, including lower mortgage rates, resilient household balance sheets, and an increase in new launch supply.

Lower mortgage rates are anticipated to be a key driver of new home sales growth in 2025. According to RHB's sector update, lower mortgage rates will contribute to the projected surge in new home sales, with an expected volume of 9,000 to 10,000 units in 2025, up 30% to 50% from last year. This growth will be supported by resilient household balance sheets, which will enable more buyers to enter the market and take advantage of the increased supply of new launches.

The shift in buying interest towards mass market and mid-tier segments is also expected to continue in 2025, driving sales in these segments. In the fourth quarter of 2024, there was a significant shift in buying interest, with around 3,500 new homes being sold, more than the entire first nine months of the previous year. This trend is expected to continue into 2025, contributing to the projected sales increase.

However, it is important to note that while lower mortgage rates will have a positive impact on the housing market, affordability concerns will continue to persist in 2025. Home prices are expected to appreciate more slowly this year than in 2024 but still by about 3.5%. The combination of rising home prices in combination with lower mortgage rates may make it more difficult for first-time homebuyers to enter the market.

In conclusion, the housing market is poised for significant growth in new home sales in 2025, driven by lower mortgage rates, resilient household balance sheets, and an increase in new launch supply. However, affordability concerns will continue to persist, making it more difficult for first-time homebuyers to enter the market. As the market evolves, it will be crucial for investors to stay informed about the latest trends and expert analyses to make informed decisions.

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