2 0 2 5 M E
from a Cloudy Crystal Ball Predictions
By: Danny Court with Elliott D. Pollack & Company
Written : January 15th, 2025
With a new administration entering the Oval Office and significant campaign promises on the table, it’s difficult to predict exactly what 2025 will bring. However, the outlook for the year ahead appears generally positive.
Greater Phoenix
The economy finished 2024 strong, with the stock market gaining over 20% for the second consecutive year—a performance not seen since the late 1990s.
The labor market showed signs of slowing compared to previous years, with average monthly job growth down to 186,000 from 251,000 in 2023. Still, the year ended on a positive note, with 256,000 jobs added in December, lowering the unemployment rate to 4.1%. Job openings surged in sectors like professional services and finance, while fewer workers were quitting their jobs, signaling increased hiring.
Inflation, which has been a concern for much of the past three years, ended the year below 3%, and wage growth outpaced inflation, improving household financial positions. This puts the economy in a relatively strong position heading into 2025. We’re not in a recession, the economy is growing, and the Federal Reserve has the tools to react if needed.
However, uncertainty remains. The Fed cut interest rates three times in the last quarter of 2024 due to cooling labor market trends and inflation. But in December, they signaled that further rate cuts were not guaranteed, citing stronger-than-expected labor markets and persistent inflation.
The incoming administration’s policies—such as new tariffs, immigration changes, and tax cuts—could have competing effects on inflation and economic growth. And high government debt and deficit spending could limit options. While many of these policies are still up for negotiation, the overall theme appears to be pro-growth, with the hope of being fiscally responsible.
In Arizona, the economic outlook is strong. Population growth is outpacing the national average, and sectors like high-tech manufacturing and semiconductors are drawing high-wage earners. The state’s economic development agency has secured a staggering $130 billion in investment over the past four years. The challenge now is ensuring infrastructure, including housing, transportation, and water, keeps pace with growth.
Overall, while the economy may slow slightly in 2025, growth is expected to remain steady, with retail sales bouncing back and employment growth recovering by 2026.
We’re expecting a solid year ahead.
The Housing Cycle is Due for a Turnaround
By: Tina Tamboer with Cromford Report
Written : January 16th, 2025
Mortgage rates have dramatically fluctuated between 6-8% since mid-2022, but sales volume in 2023 and 2024 didn’t see massive declines. This could indicate the buyer pool has hit bottom and stabilized for the time being. Combined improvements in income and rates could lead to a gradual improvement in buyer demand, but the supply count will determine what it means for price. To the right are the annual price appreciation measures for 2024.
2024 started the year in a mild seller’s market until April, then drifted into a balanced market from May to October, and a buyer’s market in November and December. When the housing market is in balance, price appreciation is expected to follow close to the rate of inflation (2.9% per December’s CPI). But annual changes reflect measures well over the current rate of inflation today. Why? The luxury market surged after the 2024 presidential election resulting in +37% more closings over $1M in December compared to last December. Properties sold over $3M were +7.4% higher in their sales price per square foot as well, which pushed overall appreciation measures higher than what most homeowners experienced. In fact, when high end sales are removed, homes under $1M appreciated just +2.9%, conveniently matching December’s rate of inflation.
At the start of 2025, the Greater Phoenix market drifted back into balance, but just barely, and it could easily drift back towards a buyer’s market. This indicates most homes will see minimal appreciation in the first part of 2025. Most mortgage experts expect rates to remain in the 6% range for most of the year, the optimists expect low-6%. The Federal Reserve reduced the Fed Funds rate in December and plans to cut more in 2025, but they are simultaneously selling their treasuries and mortgage-backed securities per their December 18th press conference.
This increases supply in the bond market, which drives interest rates up. Thus, mortgage rates spiked immediately after the Fed’s announcement. It’s as though the Feds have their foot on the gas but riding the brake at the same time.
Meanwhile, buyer season has begun, and contracts are expected to rise from January through May. January is the top month for new listings and there is no shortage of choice for buyers. As stale listings compete with new arrivals, price reductions are coming out strong, up 52% from last year. Condition, price, and patience are still the most
factors to ensuring a sale in 2025.
METRO PHOENIX
$32,525
