Event Coverage
2025 Global Housing Market Outlook
Oscar Wei, deputy chief economist of the California Association of REALTORS® (C.A.R.), spoke to members on Tuesday, Mar. 25, about economic updates on the global housing market. His presentation focused on forecasts, changes in labor market conditions and significant policy uncertainty driven by inflation and potential tariff implementations.
Global economic growth is expected to continue in 2025 as it did the year before, but weakening growth and regional disparities complicate this trend. Wei noted that while inflation has been easing in the last few weeks, it is likely to heat up again in the future because of potential tariffs.
"We're going to see a huge impact on the economy in the next year if the tariffs continue," said Wei. "Right now, we don't have a schedule so it's hard to know how tariffs will be implemented."
Wei predicted that the imposition of tariffs by the U.S could negatively impact trade-dependent countries like Canada and Mexico. While tariffs might generate some federal tax revenue, the risk of supply chain disruption, business cost increases, and job cuts could ultimately increase consumer prices, potentially costing the typical U.S. household over $1,200 per year. Tariffs are also estimated to increase building costs, which could further strain the housing market.
Despite labor market conditions remaining solid in 2024, wage growth is stabilizing or declining across many countries including the U.S. Because of this, central banks have adopted a more cautious approach to interest rate cuts. While rates are currently elevated, they are expected to gradually decrease by the end of 2025 and continue to fluctuate in the interim. Mortgage rates have also started to tick back up recently after a period of expected decline.
"Wage growth has to be strong to make up for the increasing costs of living," stated Wei. "Over the last 40 years, the house price-to-income ratio increased. Despite this, many countries still have decent homeownership rates, but affordability remains a global issue."
The California housing market faces several significant challenges. The lack of affordable home insurance has created a crisis driven by natural disasters like the recent wildfires, inflation, rising costs, and limited policy options. The unsold inventory index and median days on market have also increased statewide. However, Wei said that it is too soon to tell what the rest of the year brings for the market.
"So far in California, we've had an increase in home sales by 0.4%," said Wei. "This isn't a great start, but interest rates have gone down in the past few weeks, so let's see what happens."
Wei ended his presentation by forecasting that there may be worsening global economic conditions within the next year, including a possible recession.
"Policy uncertainty, especially in trade, will be a key factor that could derail any positive trends in global home sales," he said.
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