Historic Unaffordability Squeeze To Weigh Down Home Prices In 2025 | Lance Lambert
Want to know where the housing market is headed?
While 2024 was a fantastic year for stocks, the housing market has fared less well.
Instead, 2024 was the year gravity caught up with home prices.
They've stopped rising nationally for the most part, and certain once red-hot cities are now starting to see clear declines as inventory surges.
Is this the Wile E. Coyote moment before prices start plummeting under today's higher for longer mortgage rates?
Or will the housing market prove resilient as we enter 2025?
To find out, I talk with real estate analyst Lance Lambert, former real estate editor for Fortune and now co-founder & editor of ResiClub.
While he expects the current bifurcation to continue (greater weakness in the “sunshine” states, more resilience in the northern ones), he sees the record level of unafforability increasingly weighing on home prices in 2025.
To see his charts explaining why, click here or on the video below:
SET YOURSELF UP FOR SUCCESS IN 2025: The new year is almost here Schedule a free, no-commitment consultation with one of Thoughtful Money’s endorsed financial advisors to identify the right steps to position your portfolio advantageously for 2025:
I’m so grateful to everyone who has kindly supported me by becoming a premium subscriber to this Substack. It’s making an important difference in helping me fund the substantial operating costs of running Thoughtful Money.
Premium supporters receive my “Adam’s Notes” summaries to the interviews I do, the new MacroPass™ rotation of reports from esteemed experts, plus periodic advance-viewing/exclusive content. My Adam’s Notes for this discussion with Lance are available to them below.
If you, too, would like to become a premium subscriber to this Substack (it’s only $15/mo, less than $0.50/day), then sign up now below:
Adam’s Notes: Lance Lambert (recorded 12.19.24)
EXECUTIVE SUMMARY:
2024 witnessed strong performance in stocks and bonds, but the housing market slowed. Home prices stagnated nationally, with notable declines in previously high-growth cities due to increased inventory. Markets like Austin saw a 22% price drop from peak levels, while Dallas experienced inventory growth from 7,300 listings during the pandemic to 25,000 in 2024. The primary driver was higher mortgage rates, averaging 6–7%, creating affordability challenges and suppressing buyer demand.
Housing affordability reached its second-worst level since the 1970s, comparable to the early 1980s. Rising property taxes and insurance costs exacerbated affordability pressures. Over half of current homeowners could not afford to purchase their existing homes at today’s mortgage rates, with affordability indices nearing historic lows. Unlike the 1980s, today’s homeowners cannot rely on refinancing opportunities due to persistently high rates.
2023 marked the lowest existing home sales since 1995, with only 4.1 million sales, and 2024 is expected to
