25 Bold Economic Predictions for 2025

Welcome to my weekly post on BP! A frank, hopefully insightful, dive into real estate and financial markets. From one real estate investor to another.

The Weekly 3: News, Data and Education to Keep You Informed

1. - The National Association of Realtors released its 2025 housing market predictions, highlights include: 4.5 million existing home sales, $410k median home price, 6% mortgage rate, and 1.45 million housing starts. (NAR).
3. - Big buildings are booming in Nashville. The 58th crane tower was just erected to construct the Ray Nashville, a 367-unit mixed-use apartment building (NashUrbanPlanet).
5. - US markets remain robust, as Europe plunges. So much so that our largest state, California, is poised to pass Germany in annual GDP (MSN).

Today’s Interest Rate: 7.07%

(👇.09%, from this time last week, 30-yr mortgage)

It’s official: this century is one-quarter over.

And what a year it's been—absurd, wild, improbable, romantic, and extraordinary on this little blue dot whirling through the cosmos.

At least, that's how my year felt.

I can’t wait to see what 2025 has in store.

So today, we’re talkin’ all things 2025. I have a few bold predictions for y’all to ponder.

But first, how did we get here?

Let’s get into it.

How We Got Back to 7% Mortgage Rates

Fun fact: Since the Fed 👇 rates by 1% percent in September, the 10-yr Treasury and 30-yr mortgage have gone 👆 ~1%.

Why?

The bond market are fighting the Fed. They believe the Fed is easing monetary policy in an economy that doesn’t need easing.

Actually, they see a double threat:

1. a resilient economy slowing the Fed’s expected rate-cutting plan, and
2. potential re-inflation. And since inflation erodes the interest returns of bonds, they are unloading treasury bonds, which pushes rates up.

After $10 trillion in (likely, mostly unnecessary) economic stimulus during COVID the economy is still overheated. Inflation is still sticky at 2.7%. The vigilantes do not think inflation will hit 2% in 2025 or that the incoming administration will be able to slow government spending (again, at least in 2025). Interestingly enough, this means the bond market is doing the Fed’s job for them by keeping rates high/restrictive.

You’re welcome Jerome Powell.

But what about 2025? What else can we expect?

Without further ado, here is my list of 25 bold predictions for 2025.

25 Bold Predictions for 2025

1. 1- We will have north of 4.5 million home sales in 2025. (A normal housing market is about 5.5 million in sales, this year we’re on pace for less than 4 million).
   
2. 2- Home prices appreciate 5%, nationally. More in growth markets where businesses and people continue to favor, like Nashville, Charlotte, Charleston, and suburbs surrounding major cities. Most large financial institutions think we will be closer to 2.7%.
3. 3- GDP stays strong at 3%+ annually.
4. 4- Mortgage rates fall to 6% (bold!) I see corporate earnings taking a breather and the bond market’s tight hold on rates catching up with investors.
5. 5- Golden handcuffs keeping folks in their homes with low interest rates start to loosen.
6. 6- Inflation will fall to 2.1%, the Fed’s previous expectation, close to the Fed’s 2% target (PCE).
7. 7- Shelter inflation, which has lagged overall inflation, ticks down to near 3% (currently 4.7%).
8. 8- The stock market will gain 6%-10%, riding considerable momentum near the end of the year.
9. 9- Housing starts (including mainly apartment buildings) slow even more in 2025 and fall off a cliff in 2026.
10. 10- The bond market continues fighting the Fed on the way down helping to keep inflation under control. This keeps inflation below 2.5%. Even if the Fed cuts rates at a faster clip, the bond market likely won’t let them get away with overly dovish monetary policy. Want an example? N of 1, the Phoenix Suns just announced that hotdogs, popcorn and sodas in 2025 will be $2 (previously $9, $7, and $6.50). Now, that is some fantastic price-cuttingInflation is done! :)! (or perhaps the NBA is just losing fans…?).
11. 11- The conflict in Ukraine ends, oil prices fall even further, yet natural gas (LNG) prices increase on new rules allowing US LNG sales to Europe. Time to invest in Poland.
12. 12- Housing supply will remain elevated in the first 6 months of the year, only to fall in the second half of the year as rates tick down to 6.5% and pent-up demand for housing and household formation start to chip away at inventories. Interesting fact: housing inventory in 2017-2019 was declining before the COVID homebuying super cycle. Thus, comparisons between today and 2019 inventory levels may be unwise.

1. 13- Tariffs will be for negotiation purposes only and will not have a meaningful negative effect on inflation or the US economy.

1. 14- Federal spending will be flat YoY but we will still run an annual deficit of $600 billion+. The proposed DOGE committee does not report its federal spending cut recommendations until 2026. We are still spending and spending. Heck, on Monday, the US Treasury announced another $3.4 billion for Ukraine.
2. 15- Federal Debt will rise above $36.5 trillion and the odd charade of Congress having to raise the debt ceiling every year is removed. This action will have no fiscal consequence.
3. 16- Interest on the debt will grow much larger, $1.5 Trillion YoY.
4. 17- The current US tax structure will be extended, including corporate tax rates.
5. 18- Net migration will be positive and there will be no mass deportations. Blocks of illegal immigrants with criminal history; however, will likely be deported. This will consume the media for a few weeks, until the next news cycle.
6. 19- Periodic updates from the DOGE federal cost and regulation cutting committee keep the market bullish yet highly volatile. This refers mainly to the stock market.
7. 20- Driverless/autonomous taxis start to operate in all the top/major cities and accelerate in 2026 as statistics show their safety record is far better than humans.
8. 21- Podcast audiences and hours listened will double. Traditional short-form media will decline by more than half.
9. 22- Large mergers and acquisitions will 10x.
10. 23- Consumer robots will become available for the household.
11. 24- A large corporation has an AI incident, which makes a fiscal mistake and loses them billions.
12. 25- Bitcoin will hit $200k.
13. 26- * Bonus! And…..I will finally pull the trigger and buy a large multifamily property for my next fund, and stop buying single-family or small multifamily real estate (I just keep finding so many great deals out there!) LFG 20205!

    
    

    What is your 2025 bold prediction for the economy and for yourself? Shoot me a quick note and tell me! The first 5 respondents get to chat with me on the phone about all things real estate :).

My Skeptical Take:

There might be a few hiccups, but hey, the future's looking like a wild, fun ride!

Just think about all the wild stuff going on in our country. I think 2025 will be…

2025: Year of Cool Shit + 👆Productivity. AI integration deepens, with AI agents becoming increasingly autonomous, enhancing productivity in workplaces but also stirring debates about job displacement.

2025 is just the beginning...

Driverless cars/taxis/busses, rockets to other planets, worldwide access to cheap satellite internet anywhere, AI agents, custom medicine/medical treatments, quantum computing advancements…. 2025 is going to be lit! (as the kids say).

Human ingenuity will interact in ways that will redefine our understanding of what we are capable of as a species.

All of this should drive labor productivity and thus, our economy, job availability, and low unemployment. Importantly, AI will not mean net job losses, quite the opposite. Especially for you workers who sweat for a living. Software can’t fix that leaky faucet, lay tile, or install custom HVAC ducting in a dusty crawlspace.

More importantly, for us real estate investors, tech advancements should boost GDP productivity and GDP above current estimates, leading to far more transactions, 👆property valuations, and household formation.

I think we will look back in 10 years and mark 2025 as

Very exciting.

But, if inflation does rear its ugly head?

Buy real estate. It’s one of the best hedges against inflation.

Yes, interest rates being high makes it more difficult, but don’t reach for the allure of easy street, “investments” that promise a quick/high return. Now is the time to find an opportunity and be patient. It is not time to reach for something you would not ordinarily buy or do. Interestingly enough, in behavioral economics, there is a phenomenon where people investors hold their losing investments too long and sell their winning investments too early.

So if you do anything, don’t do selling.

See you next year.

Until next time. Stay Curious. Stay Skeptical.

Herzliche Grüße,

Andreas Mueller