It’s Not Too Late Despite Record High Everything | Guest Post
“I wish I got in sooner. I feel like I’m too late. I don’t know if I can afford it anymore.” You would be like most people if these are the thoughts running through your head when thinking about buying a home.
2024 continued a multi-year path of uncertainty, yet persistent buyers pushed prices higher, multiplying wealth and rewarding those who took action. Today’s housing market, while seemingly challenging, continues to provide stability and wealth opportunities for homeowners, and today, I want to share several housing statistics that will highlight how home prices and equity will continue to increase, despite headlines of increased inventory, longer days on market, reduced sales prices and an imminent “crash.” I’ll also cover how 2025 might provide some relief and what homebuyer trends you can take advantage of in 2025.
But before I get ahead of myself, I’m Nicole Rueth, wealth builder, real estate investor and mortgage professional of over 23 years, and if you find value in this content, do me a favor and hit that thumbs up button down below and subscribe to this channel so you never miss a weekly housing and mortgage market update.
As of October, 2024, 54 of the nation’s 200 largest housing markets had active inventory that exceeded 2019 levels. The Denver market, where I live, saw a 2024 increase in inventory dating all the way back to 2011. Even with Denver’s recent 38 percent fall of active inventory from September’s peak, you’d have to go all the way back to 2013 to see a December inventory count greater than the current 6,888 homes for sale. Active listings are starting 2025 in Denver, 39 percent higher than last year. Nationally, inventory is 27 percent more than last year; giving buyers more options and greater negotiating power than seen in recent years.
This increase in inventory should have provided the relief we were looking for, and it did. Longer days on the market and lower close-to-list prices gave homebuyers some hope. Nationally, homes were on the market for 32 days as of November, this is up 10 percent month over month and 28 percent year over year. Locally, Denver Metro saw an even bigger jump, increasing to 40 days as of December, up 43 percent month over month and 38 percent year over year. Close-price-to-list-price edged lower as the year ended down another .04 percent month over month to 98.47 percent. Considering this statistic does not account for multiple price drops for a home to go under contract, the real number is even lower.
More inventory, longer days on market and lower close-to-list logically results in lower home prices. Logically. But not in reality. Home prices have continued to increase. While softer appreciation has been a major benefit for home buyers as wages have continued to increase by an average of 4 percent a year; continued home price growth has defied the home price drop many buyers were waiting for.
Let’s look at home price growth and some equity stats. As of October 2024, Case Shiller, the gold standard for home price appreciation, revealed a 3.6 percent annual price growth nationwide and a 1.3 percent price growth for Denver Metro. FHFA which only measures appreciation on homes with conforming loans on them showed a higher 4.5 percent annual price growth. While this is an incredible relief from the double-digit price increases we saw in 2020 and 2021, it is stubbornly positive.
Persistently higher home prices have yielded stronger home equity. In fact, homeowners are in the best equity position they’ve ever been in. According to the Federal Reserve, the value of all homes owned by those living in them reached $48.2 trillion dollars. With mortgage debt reaching $13.1 trillion, homeownership equity hit a record high in 2024 of $35.1 trillion, an increase of $3.1 trillion year-over-year. Homeownership equity is the highest it’s been since 1960 when measured as a proportion of all real estate values amounting to nearly 73 percent.
Of the 62 percent of homes that have a mortgage, 48 percent of them are considered equity-rich, meaning they have more than 50 percent equity. Virginia’s homeowners snagged the top spot with 86 percent of mortgaged homes having more than 50 percent equity, while Colorado matched the nationwide average of 48 percent of its mortgaged homes being equity-rich. According to the Federal Reserve, this incredible equity growth has provided an estimated $415,000 in net worth per average homeowner. WOW.
Let’s flip this around and look at the risk as we enter 2025. As of the third quarter 2024, there were 30,000 fewer homes with negative equity than in 2023, resulting in a total of 990,000 homes nationwide, or 1.8 percent of all mortgaged homes. Locally, only 1.6 percent of mortgaged homes in Colorado have negative equity. From a risk perspective, compare this to the 26 percent of mortgaged homes underwater in 2009. Additionally, according to ATTOM Data there were 29,390 homes with foreclosure filings in November nationwide, this is down 9 percent from a year ago and represents only .05 percent of all mortgaged homes.
The strength of homeowners will continue to grow. Outside of 2007 to 2011, there was only 1 year home prices dropped, which was in 1990 by 1 percent. Based on the 16 largest data aggregators and the 100 top housing economists, home prices are expected to grow 3.5 percent in 2025 and 27.16 percent cumulatively over the next 5 years. On a $500,000 home, that 5-year growth would equate to a $135,800 net gain. This wealth growth is hard to beat in alternative equity markets considering a homebuyer can invest as little as 3 percent down.
Additionally, mortgage rates currently are expected to hover in the 6’s with many economists predicting 6.3 percent by end-of-year 2025. While I too want rates to reduce to the lower 6’s, there are many unknowns that give me pause, including the recent re-stabilization of labor, a less dovish federal reserve monetary policy and an above average economic strength as measured by GDP. One advantage rates have is the lowering of the mortgage spread. Without its current narrowing, we could have been looking at rates closer to 8 percent rather than the 7 percent that ended 2024. Going into 2025, remember, there still is an additional 70 to 80 bps padded in the mortgage spread over and above the historical norm.
As we kick off 2025, I see opportunity... increasing home prices continuing to build homeownership wealth, slightly lower mortgage rates helping to offset rising mortgage payments and a persistently strong economy supporting 4 percent annual wage growth helping affordability. What will also aid in affordability is the wealth gained in other asset modalities increasing cash deposits. This increase in cash is aiding in one of the larger trends expected for 2025.
Cash buyers increased in 2024 to an all-time high, according to NAR, to 26 percent of all purchases. 31 percent of repeat homebuyers were able to pay cash for their home purchases likely due to the increase in housing equity. This will continue to grow in 2025. What has also increased in 2024 is the age of the first-time homebuyer to an all-time high of 38, as higher home prices required more in savings. Trying to get there sooner, 25 percent of first-time homebuyers used gift funds or a loan from family to secure a property. 20 percent took money out of other assets like stock. As stocks and crypto continue to be strong, diversification opportunities will continue to support buyer demand and higher home prices in 2025.
In 2025, also expect to continue seeing the demand for multigenerational homes increase. Hitting a record high of 17 percent of all home purchases, these buyers will often have two homes to sell looking for the right home that pools their resources and meets their multigenerational living needs. In addition to families co-habitating, we are also seeing a rise in friend groups looking for opportunities in house hacking and fractional ownership. This along with buying real estate with crypto currencies will be a hot topic in 2025.
While record-high mortgage payments will inevitably turn many towards renting thinking it’s too late, 2025 will continue to reshape the conversation around homeownership, its long-term benefits and its place in an overall financial wealth portfolio. If you are looking to not only secure your position in today’s market; but have a conversation on what winning in real estate looks like, let’s sit down and design your personalized strategic program. Because I am your biggest fan!
Until next time, this is Nicole Rueth proud sponsor of the DMAR Market Trends Committee and Market Leader with Movement Mortgage.
The views, opinions and positions expressed within this guest post are those of the author alone and do not necessarily represent those of the Denver Metro Association of Realtors®. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
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