March 13 2025

Reef Daily

Reef Daily | March 13 2025

Housing Market Update

Latest Market Data (March 13, 2025) The U.S. housing market continues to grapple with a significant supply shortage, according to fresh analysis released by Realtor.com. The report reveals that the nationwide housing supply gap has reached approximately 3.8-4 million homes, making it the largest supply deficit since 2012. Despite notable progress in new-home construction in 2024, with home completions reaching the highest level in nearly two decades, this gap persists as a major challenge for the housing market. The report highlights that 1.6 million expected Gen Z and millennial households did not form last year due to various factors, including the lack of affordable housing. Vacancy rates remain significantly below normal levels at 1.1% in the fourth quarter of 2024, further exacerbating the tight market conditions.

Construction Activity Multi-family housing developments decreased in 2024 despite overall home completions growing, as builders responded to changes in the rental market. This trend is expected to continue according to the latest market analysis. Regional variations in construction activity remain pronounced, with the South leading the nation with 751,000 regional housing starts in 2024. At the current pace of construction, Realtor.com economists project it would take approximately 7.5 years to close the nationwide housing gap. However, the timeline varies dramatically by region, with the South potentially closing its housing deficit within just three years, while the Midwest could take up to 41 years, and the Northeast's inventory shortage may never close at the current construction pace.

Mortgage Rates

Current rates as of March 13, 2025:

Type	Today's Rate	Last Week's Rate
30-year fixed	6.68%	6.66%
15-year fixed	5.95%	5.94%
5/1 ARM	6.03%	5.99%

Future Forecasts Mortgage rates have experienced a slight increase today compared to last week, likely in reaction to the most recent Consumer Price Index (CPI) figures released yesterday. The CPI data showed inflation rose by 2.8% year-over-year last month, which is lower than the 3% increase reported in January and exceeded economists' predictions. This information has eased some concerns regarding the economy, and typically, when the economy performs well, mortgage rates tend to rise. Additional mortgage products seeing increases include the 20-year fixed rate at 6.11%, 7/1 ARM at 6.79%, 30-year VA loans at 5.86%, and 15-year VA loans at 5.28%. Economists suggest that while inflation has slowed, the housing market remains sensitive to economic indicators, and prospective homebuyers should consider locking in rates now rather than waiting for potential future decreases that may not materialize.

Notable Transactions

Commercial Highlights A significant commercial property transaction was recorded on March 12, 2025, with the sale of a 1.92-acre property at 178 Main Street in Brownsville for $2,080,000. This represents one of the highest value transactions in the region over the past 24 hours. The commercial real estate market continues to show signs of robust activity, with the Mortgage Bankers Association (MBA) projecting a 16% increase in total commercial lending to $583 billion in 2025, following strong fourth-quarter performance in 2024. This growth is partly driven by the $957 billion in commercial mortgages set to mature this year, representing 20% of the total $4.8 trillion outstanding balance and creating substantial refinancing opportunities.

Regional Activity In the West region, Sweet Home, Oregon saw multiple transactions including a new construction home at 4475 Knotty Pine Court selling for $455,000 and a property at 1236 Gilbert Lane trading for $435,000. In the same region, a 1,344 square foot home built in 2021 on 49th Avenue sold for $355,000. The South region continues to dominate housing activity, aligning with its leading position in housing starts. In Lebanon, a 15.16-acre property with a 1,596 square foot home on Mount Hope Drive commanded $800,000, while in Brownsville, a two-story home with basement built in 2004 sold for $549,000. These transactions demonstrate continued market activity across various price points and property types.

Market Indicators

Inventory Trends The latest data indicates persistent inventory challenges across the United States, with the housing supply gap reaching approximately 3.8-4 million homes. This deficit varies significantly by region, with the West seeing the most "missing" young households, followed by the Northeast, signaling significant unaffordability and under-supply of houses in these regions. Industry experts suggest it would take 7.5 years to close the current gap at the 2024 rate of improvement, emphasizing the need for more affordable housing to make home ownership more accessible. The current trajectory indicates that while some regions may see relief sooner, others face a prolonged period of inventory constraints that could continue to drive pricing pressures.

Buyer Demographics New data reveals shifting market dynamics affecting homebuyer behavior, particularly among younger generations. According to the Realtor.com analysis, approximately 1.6 million expected Gen Z and millennial households did not form last year due to affordability challenges and limited housing supply. This demographic shift has significant implications for housing demand and generational wealth accumulation. Additionally, real estate professionals should note emerging changes in commission structures, as homebuyers now need to negotiate the commission their agent will receive directly, rather than having it included in the seller's agent commission as was previously standard practice. This fundamental change could influence buyer behavior and transaction dynamics throughout 2025.

Regional Developments

The nationwide housing supply gap manifests differently across the four major U.S. regions, with fresh data showing distinct trajectories for recovery. The South, with a deficit of 1.15 million units, has the greatest absolute need for homes but also the most robust construction activity with 751,000 housing starts reported last year. This nearly 25% increase positions the South to potentially close its supply gap within just three years if current construction rates continue. By contrast, the West faces a 6.5-year timeline to address its inventory shortage, while the Midwest's path is significantly longer at 41 years based on current building rates. Most concerning is the Northeast, where analysis suggests the inventory shortage would never close at present construction levels, creating a perpetual challenge for homebuyers and real estate professionals in that region.

These regional disparities are reinforced by economic indicators showing that the Midwest was the only region where household formations outpaced housing starts in 2024. Industry leaders, including the National Association of REALTORS®, continue to advocate for housing-friendly policies at federal and local levels to address these challenges. The association has invested significantly in lobbying efforts, with $86.3 million directed toward election-year campaigns and ongoing advocacy for inventory expansion, fair housing, and improved access to homeownership.

Sources

This newsletter is for informational purposes only and should not be considered as financial advice.