Blog—December 30, 2024—9-10—Remodel, Report, Housing 2024

The last Monday of 2024---and yes---with all the figures bouncing around in the finals hours of the year---we brought together our very much experienced group to discuss housing, building, banking, and look to 2025.

Neil King---new Chief Building Permits—City of Sioux Falls joined the ranks of Joel Ingle—2024 President of the Real Estate Association---Tony Bachman---“steadying influence for the show” Dave and Kelly Kelly----plus Jerry Berg Intek, Joe Hansen-Extreme Heating and Cooling and Todd Boots—Past President of the SD Home Builders Association.

For the last couple of weeks ---we have been walking in march-step to the end of 2024----giving record breaking facts---sharing trends---and hopefully finding ways that our audience has more information to take action or plan for 2025.

Here are some of the notes that were shared ---first a recap from Tony Bachman—

Here’s an overview of discussing the real estate market in 2024, potential expectations for 2025, and how they have and will affect our local market:

The Real Estate Market in 2024: A Recap

The year 2024 was a transitional period for real estate, characterized by several major trends and economic influences:

    1.    Mortgage Rates:

    •    Mortgage rates remained relatively high, hovering around 6-8% in many markets, as central banks continued efforts to curb inflation.

    •    This made affordability a challenge for first-time homebuyers, resulting in reduced buyer demand in many regions.

    2.    Housing Supply:

    •    A persistent inventory shortage, particularly in urban and suburban areas, kept home prices resilient despite decreased demand.

    •    New construction activity slowed due to labor shortages, supply chain disruptions, and high material costs.

    3.    Price Trends:

    •    Home prices showed modest growth in most regions, though some overheated markets (e.g., coastal cities) saw slight corrections.

    •    Secondary and tertiary markets experienced increased activity as remote work options persisted.

    4.    Rental Market:

    •    Rents continued to rise in most metropolitan areas, driven by high mortgage costs pushing many would-be buyers into renting.

    •    Multifamily housing remained a hot sector for investors, offering steady returns despite economic uncertainty.

    5.    Commercial Real Estate:

    •    Office space faced challenges, with vacancy rates climbing in urban areas as companies downsized or embraced hybrid work models.

    •    Industrial real estate (e.g., warehouses) and retail spaces catering to essential services remained strong.

    6.    Regional Variations:

    •    The Sunbelt region saw sustained growth due to population migration, while cities in the Northeast and Midwest struggled with outmigration.

What to Expect in 2025: Trends and Predictions

Looking ahead to 2025, the real estate market is expected to evolve based on key economic and societal trends:

    1.    Mortgage Rate Stabilization:

    •    Central banks may begin easing interest rates if inflation declines, potentially lowering mortgage rates to 5-6%.

    •    This could reignite buyer interest/support a rebound in the housing market.

    2.    Housing Inventory:

    •    Inventory levels are expected to improve slightly as more homeowners list properties and new construction projects complete.

    •    Policy initiatives promoting affordable housing may impact supply positively.

    3.    Affordability Challenges:

    •    Despite potential rate relief, affordability will remain an issue due to elevated home prices and slower wage growth in some sectors.

    •    Entry-level homes will likely be in high demand, with intense buyer competition.

    4.    Technology and Innovation:

    •    Solutions like virtual showings and AI-driven property management will continue to transform the market.

    •    Smart home technologies and energy-efficient upgrades will be major selling points for new builds.

    5.    Investor Trends:

    •    Institutional investors may shift focus toward build-to-rent communities, catering to the growing renter population.

    •    Multifamily housing and industrial real estate will likely remain attractive for investment due to their strong returns.

    6.    Market Shifts:

    •    Suburban/exurban markets continue interest-remote work remains viable.

    •    Some urban markets could recover as younger buyers seek opportunities in less competitive environments.

    7.    Commercial Real Estate Adjustments:

    •    Retail spaces catering to experiential shopping (e.g., dining, entertainment) are expected to see growth.

    •    Offices may undergo repurposing/downsizing to accommodate work models.

The real estate market in 2024 underscored resilience in the face of economic challenges, while 2025 is shaping up to be a year of cautious optimism. With potential mortgage rate relief and incremental inventory growth, buyers and sellers may find more opportunities, though affordability and macroeconomic conditions will remain key factors.

From Dave Kelly and Kelly Kelly---mortgage rates showed little change in last 2 years.

Will we find ourselves in the same position in 2025? That depends upon the state of the economy and inflation. Until and unless inflation returns to 2% or lower, longer term rates will have a very hard time making significant progress.

Kelly (Kelly) reported 2024 was a wonderful year for people 62 or better in age—Bill. Everyone was worried about interest rates and mortgage payments if they still had one. Kelly got to share the good news of the Home Equity Conversion Mortgage (HECM---where no mortgage payment is required with the HECM and higher interest rates help the Line of Credit grow faster.

Kelly helped 40 families use their housing wealth thru the HECM to increase their cash flow, increase their net worth and create future tax advantages. Yes it changed how they viewed and used their housing wealth, bettered their life and the longevity of their retirement plan. A home equity check-up is an easy way to find out how much housing wealth you have and options available to you.

You might want to start 2025 with something new.

We heard from Jerry Berg--Intek, Joe Hansen—Extreme Heating and Cooling and Todd Boots—Home Builder and Past President of the SD Home Builders Association.

They have been busy---had staff’s they truly support---and are finding their customers are return visitors.

An interesting year---and we enjoy sharing their opinions as many of us want to stay warm---safe in our homes—and know there are individuals who want to help during these cold days of winter.

We’ll do our final report on 2024---on Monday---January 13th---with a few morsels available on January 6th.

The Special Re-modelers and Report Card Shows---we have added to close the year will continue to share opinions for many concerns in 2025.

Norm Anderson will post the show as a Podcast---on the KELO-AM Website---just look for the It’s YOUR Business Show—December 30, 2024-9-10.

Use these notes as a guide to what is in the show---and where to find it. Questions for me—feel free to call-text at 605-728-BILL (2455) or email me at bill.zortman@mwcradio.com.