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Explore the challenges in the U.S. housing market in 2025, from rising home prices and fluctuating mortgage rates to inventory shortages. Learn how these factors affect affordability, relocation, and employee benefits.
A New Administration
The lack of affordable housing in the U.S. has been a major issue during this election for both parties –each offering up solutions in very different ways.
According to Redfin's Head of Economic Research, Chen Zhao, the incoming president's plan includes lowering mortgage rates, loosening building regulations, reducing illegal immigration to make more homes available for American citizens, and privatizing Fannie Mae and Freddie Mac. However, in a November 11, 2024 article in Newsweek, experts suggest that significant changes are not expected in the short term. Home prices will likely continue to rise due to limited supply, and fluctuating mortgage rates may cause both buyers and sellers to hesitate. In the long run, the market could either improve or worsen, depending on which economic policies the new administration prioritizes. "We're all in wait-and-see mode to see which economic policies are addressed first and how they could impact the housing market," says Zhao.
Interest Rate Influence
One of the most significant factors influencing housing market activity is mortgage interest rates. In2025, while overall interest rates are expected to remain relatively low, potential fluctuations may occur due to broader economic conditions and Federal Reserve policies. However, the rate cuts initiated in September 2024 have primarily benefited credit card, personal loan, and auto borrowers, offering some relief, but homebuyers are unlikely to see the same advantages as mortgage rates are expected to continue climbing.
In fact, following the recent election, 30-year fixed mortgage rates briefly surged, settling at 6.98% as of Thursday, November7th.
The rate has risen by nearly 1% since September, even after two Federal Reserve cuts to its benchmark interest rate totaling 0.75%, including the 25-basis point cut announced November 7th.
Why? Mortgage rates are more directly tied to 10-year Treasury bond yields, which tend to rise when investors expect stronger economic growth and higher inflation. According to Forbes, the likelihood of another cut in January is low, with about even odds that the Federal Reserve will cut rates when they meet again in March 2025.
Inventory Levels
The National Association of Realtors (NAR) reported that the U.S. housing supply, measured in months of inventory, hit a record low of 1.6 months in January 2022. Although the inventory had risen significantly to 4.2 months by August 2024, it still falls short of meeting the current demand. Consequently, demand continues to outpace housing supply—and likely will remain for some time.
While rising materials costs, supply-chain issues, and labor shortages stemming from COVID all contribute to the cause, the shortage actually existed long before the pandemic. The U.S. has failed to keep up with the housing demands of a continually increasing population since the Great Recession, which took place around 2007–2008.
Affordability
Affordability will continue to be a major concern, especially for first-time homebuyers.
Although lower interest rate scan ease affordability challenges, rising home prices in certain markets may still pose challenges. Government programs and initiatives aimed at supporting first-time homebuyers could help alleviate these pressures.
The Bottom Line for Relocating Employees
A wait-and-see strategy may not be an option for relocating families, as the window to accept a relocation is often short. This creates added stress and reluctance for homeowners who are "locked in" with ultra-low mortgage rates and hesitant to trade them for higher rates in an expensive housing market.
NEI’s 2023 U.S. Domestic All Benefits Survey indicates that more companies are responding to the ever-changing needs of employees and internal business units by including more flexibility in their polices. Survey results also show that more companies are providing lease cancellation and rental finding assistance benefits for executive-level employees. There has also been a small increase in duplicate housing eligibility year over year as employees are opting not to sell their homes, primarily looking to hold on to their existing rock-bottom interest rates.
Amy Smith, Director of Global Mobility Strategies at NEI says, “one question NEI kept in mind while preparing the survey was ‘are more companies offering cost of living allowance (COLA)and mortgage interest differential allowance (MIDA) benefits with the cost of living increasing and the mortgage interest rates climbing so much?’” According to the survey, the answer is not really. With the cost of living increasing everywhere, the use of COLAs so far has been a relatively small increase compared to the rise in living expenses, but the expectation is that usage could increase more in the coming years. Additionally, only 2% of companies currently offer Mortgage Interest Differential Allowances (MIDAs), for their Executives and 1% for their Directors and VPs.
When considering implementation of a MIDA program, Smith encourages companies to consider the interest rate differential rather than the interest rate itself.
While MIDAs of old used to impose an 8% minimum rate for eligibility, the differential was typically only2% to 3%. Though rates are now still below that prior 8% threshold, there has been an increase of nearly 5% for some homeowners who purchased around 2%. Amore appropriate method would incorporate the MIDA based on a minimum differential vs. the rate.
Looking forward, NEI is constantly monitoring market conditions, client policies, and transferee feedback to collaborate with clients on aligning organizational goals with employee needs. Please contact your NEI representative for assistance or information on these challenging market dynamics.
Sources:
1. https://www.newsweek.com/homebuyers-face-difficult-housing-market-under-trump-presidency-1982705
2. https://www.cnbc.com/2024/11/07/federal-reserve-cut-interest-rates-what-will-get-cheaper.html
3. https://www.mortgagenewsdaily.com/mortgage-rates/30-year-fixed
5. https://www.bankrate.com/real-estate/low-inventory-housing-shortage/
6. https://www.neirelo.com/podcast/relocation-policy-benefits
Explore the challenges in the U.S. housing market in 2025, from rising home prices and fluctuating mortgage rates to inventory shortages. Learn how these factors affect affordability, relocation, and employee benefits.
A New Administration
The lack of affordable housing in the U.S. has been a major issue during this election for both parties –each offering up solutions in very different ways.
According to Redfin's Head of Economic Research, Chen Zhao, the incoming president's plan includes lowering mortgage rates, loosening building regulations, reducing illegal immigration to make more homes available for American citizens, and privatizing Fannie Mae and Freddie Mac. However, in a November 11, 2024 article in Newsweek, experts suggest that significant changes are not expected in the short term. Home prices will likely continue to rise due to limited supply, and fluctuating mortgage rates may cause both buyers and sellers to hesitate. In the long run, the market could either improve or worsen, depending on which economic policies the new administration prioritizes. "We're all in wait-and-see mode to see which economic policies are addressed first and how they could impact the housing market," says Zhao.
Interest Rate Influence
One of the most significant factors influencing housing market activity is mortgage interest rates. In2025, while overall interest rates are expected to remain relatively low, potential fluctuations may occur due to broader economic conditions and Federal Reserve policies. However, the rate cuts initiated in September 2024 have primarily benefited credit card, personal loan, and auto borrowers, offering some relief, but homebuyers are unlikely to see the same advantages as mortgage rates are expected to continue climbing.
In fact, following the recent election, 30-year fixed mortgage rates briefly surged, settling at 6.98% as of Thursday, November7th.
The rate has risen by nearly 1% since September, even after two Federal Reserve cuts to its benchmark interest rate totaling 0.75%, including the 25-basis point cut announced November 7th.
Why? Mortgage rates are more directly tied to 10-year Treasury bond yields, which tend to rise when investors expect stronger economic growth and higher inflation. According to Forbes, the likelihood of another cut in January is low, with about even odds that the Federal Reserve will cut rates when they meet again in March 2025.
Inventory Levels
The National Association of Realtors (NAR) reported that the U.S. housing supply, measured in months of inventory, hit a record low of 1.6 months in January 2022. Although the inventory had risen significantly to 4.2 months by August 2024, it still falls short of meeting the current demand. Consequently, demand continues to outpace housing supply—and likely will remain for some time.
While rising materials costs, supply-chain issues, and labor shortages stemming from COVID all contribute to the cause, the shortage actually existed long before the pandemic. The U.S. has failed to keep up with the housing demands of a continually increasing population since the Great Recession, which took place around 2007–2008.
Affordability
Affordability will continue to be a major concern, especially for first-time homebuyers.
Although lower interest rate scan ease affordability challenges, rising home prices in certain markets may still pose challenges. Government programs and initiatives aimed at supporting first-time homebuyers could help alleviate these pressures.
The Bottom Line for Relocating Employees
A wait-and-see strategy may not be an option for relocating families, as the window to accept a relocation is often short. This creates added stress and reluctance for homeowners who are "locked in" with ultra-low mortgage rates and hesitant to trade them for higher rates in an expensive housing market.
NEI’s 2023 U.S. Domestic All Benefits Survey indicates that more companies are responding to the ever-changing needs of employees and internal business units by including more flexibility in their polices. Survey results also show that more companies are providing lease cancellation and rental finding assistance benefits for executive-level employees. There has also been a small increase in duplicate housing eligibility year over year as employees are opting not to sell their homes, primarily looking to hold on to their existing rock-bottom interest rates.
Amy Smith, Director of Global Mobility Strategies at NEI says, “one question NEI kept in mind while preparing the survey was ‘are more companies offering cost of living allowance (COLA)and mortgage interest differential allowance (MIDA) benefits with the cost of living increasing and the mortgage interest rates climbing so much?’” According to the survey, the answer is not really. With the cost of living increasing everywhere, the use of COLAs so far has been a relatively small increase compared to the rise in living expenses, but the expectation is that usage could increase more in the coming years. Additionally, only 2% of companies currently offer Mortgage Interest Differential Allowances (MIDAs), for their Executives and 1% for their Directors and VPs.
When considering implementation of a MIDA program, Smith encourages companies to consider the interest rate differential rather than the interest rate itself.
While MIDAs of old used to impose an 8% minimum rate for eligibility, the differential was typically only2% to 3%. Though rates are now still below that prior 8% threshold, there has been an increase of nearly 5% for some homeowners who purchased around 2%. Amore appropriate method would incorporate the MIDA based on a minimum differential vs. the rate.
Looking forward, NEI is constantly monitoring market conditions, client policies, and transferee feedback to collaborate with clients on aligning organizational goals with employee needs. Please contact your NEI representative for assistance or information on these challenging market dynamics.
Sources:
1. https://www.newsweek.com/homebuyers-face-difficult-housing-market-under-trump-presidency-1982705
2. https://www.cnbc.com/2024/11/07/federal-reserve-cut-interest-rates-what-will-get-cheaper.html
3. https://www.mortgagenewsdaily.com/mortgage-rates/30-year-fixed
5. https://www.bankrate.com/real-estate/low-inventory-housing-shortage/
6. https://www.neirelo.com/podcast/relocation-policy-benefits
