What is the real estate outlook for 2025?
The past year has seen several changes that are likely to affect the residential rental market:
- Increased housing inventory in many areas.
- Lower mortgage rates compared to last year.
- Job growth and economic recovery since the COVID-19 pandemic.
Higher inventory and lower interest rates could drive down home prices, making homeownership more accessible. The National Association of Realtors projects a 9% increase in existing home sales and an 11% rise in new home sales.
While more people buying homes could reduce demand for rentals, improved conditions may still encourage both renting and buying. Investors are also likely to expand their portfolios, with some flipping properties and others holding them for rental income.
To stay profitable, landlords and property managers should consider revising their Rental Applications and Lease Agreements to reflect changing costs and market conditions.
How might regulations and rental policies change in 2025?
Laws and policies affecting the rental market can evolve at local, state, and federal levels. Since most regulations impacting property owners and managers are local, staying informed about developments in city or county governments is crucial.
At the federal level, proposed changes to government spending could affect homebuyer assistance programs, including loan guarantees from the Federal Housing Administration, Department of Veterans Affairs, and Department of Agriculture. If these programs are scaled back, lenders may become more cautious, potentially leading more people to remain in the rental market.
As policies shift, local governments may respond with new ordinances to address changing conditions. This could lead to greater variation in rental regulations across different jurisdictions, emphasizing the need for property owners to stay up to date on local requirements.
Are condo and multifamily properties expected to continue gaining value in 2025?
The factors that are driving projections of continued growth in housing inventory and other favorable metrics also apply to multifamily properties going into 2025. The country is still experiencing an underproduction of multifamily real estate. The most populous states—including California, Texas, New York, and Florida—are experiencing deficits of hundreds of thousands of units.
High occupancy in these properties leads to high demand. Multifamily properties are likely to increase in value in the coming year, making them appealing prospects for real estate investing and development.
Will 2025 be a good year to invest in additional properties or improvements?
Factors to consider when deciding whether to purchase additional properties or make improvements to existing ones include home prices, interest rates, and the regulatory environment. As of late 2024, prices are still going up in many parts of the country, but at a slower rate than in recent years. Mortgage rates and other interest rates are declining from the levels they reached in 2023 after the Fed’s rate hikes.
While these market trends suggest that late 2024 might not be the best time to invest in more properties, they paint a more positive picture of market conditions in early 2025. Rental property owners might find that the coming year will be a good time to expand their portfolios.
Regarding property improvements, sustainability is gaining in popularity among consumers. People want to see eco-friendly improvements that reduce energy use and carbon emissions. Technological advancements are making these improvements more affordable.
Many “green building” improvements are currently eligible for tax credits and deductions. The Inflation Reduction Act of 2022 introduced new incentives and expanded existing ones to encourage the use of energy-efficient materials and construction methods. However, some of these incentives may change or be reduced in the coming years.
What new property types or markets could landlords explore in 2025?
Eco-friendly construction is in high demand. Even if tax incentives for energy-efficient buildings change in 2025, market dynamics are likely to continue supporting these efforts, especially in larger cities.
Technological advancements are also affecting how property management companies and real estate investors do business. Advancements in artificial intelligence (AI) systems are helping streamline many processes involved in real estate investing and property management. AI can automate many functions, help screen lease applications, process maintenance requests, and improve overall efficiency.
The past few years have seen some confusion and uncertainty in the rental market, and 2025 is likely to continue this trend. If you have more questions about your rights or duties as a landlord or property manager, contact a Rocket Legal Pro today for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
