2025 Real Estate Market Predictions
Let’s take a jab at this! Predicting markets is a risky business… But I believe that its’s an important reflection to have, so I’ll stick my neck out and give a shot at the 2025 real estate market predictions for the Roaring Fork Valley.
As expected, president Trump is approaching the beginning of his second term by throwing a wrench into just about everything, from the economy to politics, bringing uncertainty to most topics. Almost everybody is jumping to their guns, either to criticize him on social media or to buy stocks according to what they think will happen.
Other underlying trends disappeared from the headlines, though they will likely be the ones determining what’s coming next. More so than who is sitting in the Oval Office. As a real estate person exposed to negotiations on a daily basis, I think I can understand how president elect Trump’s disruptive approach builds up his leverage. And I won’t start trying to figure out how his statements, if they turn into real policies, would impact us. We shall see what actually gets enacted, and what was just an attempt to start negotiations on a given topic…
That being said, for better or worse president Trump undeniably triggered optimism in the business world, and in the stock market. Weather that was justified or not, the immediate effect of his statements were to exacerbate the current situation: asset prices, especially stocks went up, as well as expectations of inflation. Assets are expensive, homes and stocks. If you own them, you’re happy. If you’re trying to buy them for the first time, you’re out of luck.
How much higher can we go? Is buying a house in 2025 buying at the top? Should you sell before that?
Any signs of an imminent crash out there?
Unemployment rate by state
The last few years were such a shift for the real estate market. In the Roaring Fork Valley probably more than anywhere else. It makes a lot of us are simply stunned and waiting for things to get back to “normal”. To be clear, if normal is pre-pandemic levels, you are waiting for a 20 to 50% reduction in values. That’s called a crash. Here are some indicators that show that a crash is extremely unlikely:
Unemployment is at 4.1% (low) in the US. Colorado matches the national average. In our valley specifically, I’d bet that it’s even lower.
Growth is at 2.8% nationally, above trend.
The real estate market shows no clear signs of a slow down: homes sell fairly quickly, there is no widespread price reductions, there is no increase in inventory. Some other areas got overbuilt and are seeing a slow down (especially in Texas and Florida), but there is nothing to see in our valley. Homes sell fast and there is not enough for sale.
Appart from a black swan event - unpredictable by definition - there is no decline or crash in the cards for next year.
A Black swan event?
Whether it’s another pandemic, a war, a financial crisis, we can’t reasonably be living our lives, and make decisions based on we we can’t intelligibly anticipate. But it’s always wise to have a financial safety net or cushion before you start considering pulling the trigger on a major investment or purchase, such as a home. Especially in a hot and expensive market. When you buy real estate, you need to make sure that you can weather a storm without having to sell it in a rush.
I don’t see a crash brewing by looking at the data. But considering the incredible run we just had in real estate and other asset classes, we are not shielded from an obscure financial scheme that we have no idea about, and that would have grown in large proportions during the few decades of fruitful growth we just went though. These schemes only come to the surface when things slow down, and they simply haven’t for a while. Crashes are necessary to drain some of the excess and abuse that tend to grow during prosperous times, and I can’t help but thinking that some unsustainable financial enterprises have been allowed to survive, and thrive undisturbed, through last few decades. Wether they are big, and bad enough to really take down the economy momentarily, there is no way to know. But it’s always wise to have a cushion in case something happens.
How is such an unaffordable market sustainable?
To be able to afford a home in the low to mid-valley, you need a downpayment anywhere fro $200k to $500k, and be ready to stomach a monthly payment north of $5k per month. This is the new normal and it seems to be here to stay for several reasons.
First, the inventory is so low that every listing is geared towards to most willing and able buyer in the area. If there is only one house for sale in a town, with no prospects of other new listings, you can virtually list it at any price.
The main reason why nobody is selling, and why inventory is low, is that people had locked into very low mortgage rates. These low rates were secured for 30 years in 2020, 2021 or 2022. We are 26 to 28 years from these low rates disappearing! I’m expecting the inventory to stay low, therefore price to stay high and sales volume to be anemic for a long time.
In a tale of two economies, some of us are doing really well and have seen our ability to borrow and service debt go up quite a bit. In general, towns like Glenwood Springs and Carbondale have seen an influx of wealthy buyers since COVID. They are the ones still buying, and current prices reflect their buying power.
The stock market is at an all time high, as well as real estate. High valuation is a self-fulfilling prophecy and asset holders are able to use it to leverage into real estate, creating a demand despite - or because of - high prices.
Rents are high. That’s a chicken or the egg type of situation. Because rents are high, it justifies higher sales price. $5k/month seems high to a mortgage payment, but not so much if it has to be what you would pay for rent otherwise.
Overall it seems like the low affordability is here to stay and people are wrapping their head around the fact that a bigger share of their income will go towards housing, especially if they want to live in an attractive area, mountain towns like ours being one of them.
The Roaring Fork Valley micro-climate
If you feel like things are more expensive across the board an everywhere, but housing in our valley is much worse than anything else… Well, you are right.
Carbondale IS THE TOWN THAT HAS SEEN THE MOST GROWTH IN HOME VALUES OVER THE LAST 20 YEARS IN THE ENTIRE USA!!
Also within the top 20 are Rifle (#13) and Glenwood Springs (#19).
Interest rates will remain high and will slow down price appreciation
Affordability creates a ceiling for price appreciation. No matter how motivated buyers are, they can only afford so much. As we all know housing isn’t the only thing that went up and at some point, there is no money left. And if high prices are part of what makes this market so unaffordable, interest rates also play a big role.
Lately the Federal reserve, who is the institution responsible for setting the federal funds rate, lowered their rate by 0.75% in 2 increments. They were signaling their understanding that some pain was growing in some parts of the economy and wanted to ease their policy to avoid any damage. The caveat is… This time around mortgage rates did not follow the federal funds rate in their downward trend. Mortgage rates remained the same, and even went up during that time. Why? Because the Fed doesn’t set mortgage rates. They set the federal funds rate, that then impacts the 10 year treasury yield. The 10 yield treasury yield is the rate that the government borrows money at on a 10 year timeframe, and mortgage rates tend to follow the 10 year treasury yield. So to make it simple, our mortgage rates are related to what rate the government borrows at. That government rate being set on the market, if the government borrows a lot (that the demand side on that market) the mortgage rates tend to stay high. And if there was one thing that both parties agreed on during the election campaign was that they would both borrow like there was no tomorrow. As long as the government will keep borrowing like there is no tomorrow, mortgage rates will stay high.
Conclusion, rates will stay high! Again, a black swan event could change that prediction, but by definition we can’t forecast that.
2025 Market predictions
So here it is! This is what I see happening in 2025:
Prices will stay elevated and somewhat stabilize close to where they are today. In some other parts of the country they already have this year, but we were steaming ahead in this valley. Appreciation doesn’t typically go for 10% a year to 0% the next year. So I believe that it will come down to 3 to 5% in 2025. If that happens to be true, these will be the median prices points for a single family home in the different towns in the valley:
Aspen: $12.5M to $13.5M
Snowmass Village: $7M to $8M
Basalt: $2.5M to $3M
Carbondale: Low $2M
Glenwood Springs: Right around $1M
New Castle: Between $700k to $750K
Silt: Right around $600k
Rifle: Right around $550k
Parachute: Right around $500k
Rates will hover between 6% and 6.5%
Sales volume will remain anemic
Real estate will remain expensive to rent, own, operate and maintain in our valley. People will be willing to allocate a larger share of their income to housing in this valley for the time being.
If you want to discuss what the best strategy is to buy or sell real estate next year, contact me!
