(NEW YORK) — Homebuyers eager to forget this year’s housing market may ring in 2025 with an extra dash of zeal.
A rapid rise in home prices has coincided with stubbornly high mortgage rates, shutting out potential buyers with daunting costs.
A burst of supply could have eased prices, but no such relief was forthcoming. Instead, homeowners have balked at swapping out their current mortgage rates for higher ones, and construction has failed to make up for a long-standing shortage in new homes.
Unfortunately, next year’s housing market will likely bring more of the same, experts told ABC News.
Home prices may rise at a slower pace, offering a glimmer of hope as high mortgage rates fall slightly but continue to weigh on consumer activity, they said.
Still, the market appears locked into a fundamental mismatch of supply and demand set to frustrate buyers, the experts added.
“I don’t see much sunshine in the forecast,” Ken Johnson, chief of real estate at the University of Mississippi, told ABC News. “It’s going to be gloomy and overcast, but it’s not going to be stormy.”
An unusual trend has beguiled buyers: Home prices are soaring, despite a prolonged stretch of high mortgage rates that, in theory, should crimp demand and push down prices.
Market observers who spoke to ABC News said they expect both price increases and mortgage rates to ease in 2025 — but only a smidge.
The average rate for a 30-year fixed mortgage stands at 6.85%, FreddieMac data last week showed. That figure has ticked up slightly since the start of the year, despite a series of interest rate cuts at the Federal Reserve in recent months.
Earlier this month, Fed Chair Jerome Powell said rate cuts may slow over the course of 2025. Such a policy would leave mortgage rates higher for longer, experts said.
Redfin, a Seattle, Washington-based real estate giant, forecasts average 30-year fixed mortgage rates will remain in the high 6% range over the duration of 2025. Online real estate marketplace Zillow says mortgage rates will fall, but only moderately.
Alongside persistently high mortgage rates, experts predicted a continued, albeit slower, rise in home prices.
In September, Goldman Sachs predicted a 4.4% rise in home prices in 2025, which would mark a slight decline from the 4.5% rise in 2024.
The persistence of high mortgage rates will put some downward pressure on prices, since demand will soften as many consumers forego expensive loans, experts said, but the high rates will also exacerbate a lack of supply that has kept prices soaring.
Current homeowners will want to remain locked into relatively low mortgage rates. Homebuilding will deliver much-needed supply of new homes, but it will fall well short of the amount required to meet demand, experts said.
“I don’t want to be the bearer of bad news, but it doesn’t feel like prices are going to moderate that much,” Marc Norman, associate dean at the New York University School of Professional Studies and Schack Institute of Real Estate, told ABC News. “If you don’t have a lot on the market, that’s going to put pressure on prices.”
Experts who spoke to ABC News acknowledged that economic forces could defy expectations, leaving the housing market in better or worse shape than anticipated.
Faster-than-expected progress in bringing inflation down to the Fed’s target level could free up the central bank to slash interest rates, which in turn would lower mortgage rates, some experts said. An economic downturn would damage household finances and ease demand, likely leading to a drop in home prices, they added.
If inflation proves more stubborn than expected, however, interest rates may stay high for even longer, experts said, which could put the housing market into an even deeper freeze.
For now, the outlook for 2025 appears clear, Christopher Mayer, a real estate professor at the Columbia University Business School, told ABC News.
“My best guess is that next year is a lot like this year,” Mayer said.
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(WASHINGTON) — President Donald Trump on Thursday said he will call for a lowering of U.S. interest rates, exerting pressure on the Federal Reserve despite a longstanding norm of political independence at the central bank.
During a virtual address to the World Economic Forum in Davos, Switzerland, Trump demanded a drop in interest rates after calling for a reduction of oil prices set by a group of nations known as OPEC, which includes Saudi Arabia.
The prospect of low oil prices will enable the Fed to dial back its fight against inflation and bring down interest rates, Trump said.
“I’m going to ask Saudi Arabia and OPEC to bring down the cost of oil,” Trump said, later adding: “With oil prices going down, I’ll demand that interest rates drop immediately.”
The U.S. does not belong to OPEC, nor does the president play a role in the organization’s decisions regarding the price of oil sold by its member states.
The central bank is typically insulated from political interference, but several past presidents have sought to influence the Fed’s interest rate policy, including Trump, who repeatedly spoke out in favor of low interest rates during his first term.
On the campaign trail in August, Trump said a U.S. president should have a role in setting interest rates.
Fed Chair Jerome Powell struck a defiant tone in November when posed with the question of whether he would resign from his position if asked by Trump.
“No,” Powell told reporters assembled at a press conference in Washington, D.C., blocks away from the White House.
When asked whether Trump could fire or demote him, Powell retorted: “Not permitted under the law.”
The prospect of a presidential role in setting interest rates drew opposition from both liberal and conservative economists who previously spoke to ABC News.
Critics of an expanded role for the president point to a bout of high inflation in the 1970s and 1980s. Before the inflation took hold, President Richard Nixon had urged Fed Chair Arthur Burns to cut rates in the run-up to the 1972 presidential election.
Nixon’s advocacy is widely viewed as a contributing factor for lower-than-necessary interest rates that enabled inflation to get out of control, some economists noted.
“Allowing the president, any president, to help set monetary policy would eventually wreck the U.S. economy,” Mark Zandi, chief economist at Moody’s Analytics, told ABC News.
The statements from Trump on Thursday came amid a monthslong reduction in interest rates.
The Fed cut interest rates by a total of a percentage point over the final months of 2024, delivering relief for borrowers long-saddled by a prolonged stretch of high interest rates.
The central bank, however, has indicated that it may cut rates less often in 2025 than it previously indicated. Inflation may prove more difficult to bring under control than policymakers thought just a few months ago, according to the bank.
The Fed is set to make its next decision on interest rates next week. The central bank is widely expected to maintain interest rates at the current level of between 4.25% and 4.5%, according to the CME FedWatch Tool, a measure of market sentiment.
Speaking on Thursday, Trump said a lowering of rates could bring about a reduction of interest rates worldwide.
“They should drop all over the world,” Trump said. “They should follow us.”
(NEW YORK) — An Elon Musk ally hired to overhaul the U.S. Department of Treasury has a lengthy record of undertaking hardline reforms in the private sector that demoralized staff and made them fear for their jobs, according to interviews with several former employees at his tech firm.
Tom Krause, the CEO of Silicon Valley-based Cloud Software Group, oversaw layoffs at his company in each of the last three years while instituting a return-to-office mandate, rigid performance ratings, and a request that weekly updates be sent from workers directly to Krause, the former employees told ABC News — echoing the sort of reforms that Musk’s new Department of Government Efficiency has begun undertaking within government agencies.
One former Cloud Software Group employee said she hid her pregnancy for fear it could make her a target of layoffs. An ex-manager said they dreaded filing performance reviews of subordinates, knowing some workers may fall victim to the next cycle of cuts. Another former employee said they avoided expressing unease in company emails or in the messaging app Slack out of concern that it could jeopardize their job.
“They’re taking business practices popular in boardrooms and on golf clubs, and they’re taking them into government,” Kathleen Roan, a former senior content designer at Cloud Software Group who retired in 2024, told ABC News.
Krause in recent days has vaulted into a key position at the Treasury Department, overseeing its $5 trillion payment system, which sends funds to tens of millions of Americans for programs like Medicare and Social Security, the agency’s website says.
In a press release, the agency said Krause brings decades of experience “managing balance sheets” to the agency’s effort to “maximize payment integrity.”
Neither Krause nor Cloud Software Group responded to a request for comment from ABC News.
A ‘hatchet man’
Several former employees ABC spoke with praised Krause as a savvy business leader, and one said they enjoyed their tenure at the company. But most of them requested that they not be identified due to concerns about reprisals.
“There was a whittling away of the things that made you feel like you were a valued employee and then finally ‘Oh, now we’re going to start eliminating jobs,'” Roan said of her time at the company under Krause. “They saw people as expendable.”
Cloud Software Group company was established in 2022 through the acquisition of enterprise software firm Citrix in a private equity-backed $16.5 billion deal, followed by a merger with TIBCO Software.
Krause, who had previously served as president of software at Palo Alto-based Broadcom, was named CEO of the new firm.
Within months, in January 2023, the company cut 15% of its workforce.
“The feeling was that he was there to cut expenses down and be a hatchet man, similar to what’s happening now in the government,” a former human resources employee said. “Everyone was on edge.”
Some of the cost-cutting measures at Cloud Software Group under Krause were first reported by The American Prospect.
Within months of Krause’s arrival, the company also requested that employees return to the office, multiple former employees said.
At the same time, the company closed some offices in an effort to reduce overhead costs, multiple former employees told ABC News. The closures left some workers without an office nearby, making them exempt from the return-to-office requirement, a former employee said.
On Inauguration Day, Trump signed an executive order calling on federal agency heads to mandate in-office work. Musk backed that policy in an op-ed he co-authored in the Wall Street Journal, predicting that mandatory return to work “would result in a wave of voluntary terminations that we welcome.”
‘A much higher level of business discipline’
Employees at Cloud Software Group lost some perks, too.
David Morgan, a former client support provider at Cloud Software Group, said the firm ended his quarterly bonuses, which amounted to $16,000 each year. Workers also stopped receiving “thank you” days, an extra allotment of paid time off, Morgan said.
“Everything we were told would be benefits at the time of hiring was slowly removed,” Morgan said. An Air Force veteran with a disability, Morgan said he received one day of notice before he lost his job as part of a round of layoffs in January 2024, after having been assured that his position had been safe over the months prior.
In a post on LinkedIn that month, Krause said the company had improved but still required personnel changes.
“Our focus on adding value for our long-standing customers while driving a much higher level of business discipline and accountability is bearing fruit — with customer retention and financial results for our first fiscal year as Cloud Software Group coming in ahead of plan,” Krause said.
“But change often means difficult decisions,” he wrote. “While we have a number of areas of the business where our plans involve additional hiring to support our goals, they also mean a pragmatic look at those places where we simply need fewer or different resources.”
In a direct message to Krause over LinkedIn days later, Morgan wrote, “It’s challenging to reconcile my dedication and commitment to the company with the feeling of being let go in a way that seemed to lack empathy.” It does not appear that Krause responded, according to a screenshot of the conversation reviewed by ABC News.
Another policy shift under Krause brought the implementation of employee-performance ratings on a scale of one to three, multiple former employees said.
The ratings took a toll on one former manager, who said the company required them to label at least one subordinate as a low performer. “I had to give one person a low score, even if I thought they didn’t really deserve a low score,” they said. “It was miserable.”
Rating systems have reportedly been deployed as part of the Trump administration’s recent push to cut staff. Senior staff across the Department of Health and Human Services were told to rank thousands of employees in probationary periods, with as much as 40% to be deemed non-mission critical, the Washington Post reported.
‘It’s very alarming’
Daniel Keum, a professor of management at Columbia University Business School, said the apparent overlap between cost-cutting initiatives at Cloud Software Group and some federal agencies exemplifies the Trump administration’s use of tactics borrowed from the private sector.
“In tech, there’s a mentality that you have to break things to make them a lot better,” Keum told ABC News. “When transposed into federal agencies, that mentality becomes very dicey.”
Nearly all former employees who spoke to ABC News expressed shock or concern about the role at the Treasury taken up by Krause, though one expressed indifference and another voiced support.
“It’s very alarming,” said Roan, the former Cloud Software Group design architect.
“He should absolutely not have anything to do with the U.S. Treasury Department,” said Morgan.
In contrast, a former account executive at the company applauded the choice of Krause for the Treasury role, citing his financial acumen.
“I don’t think you can find a better person to swim in the weeds [and] sit in the edifice of the Treasury Department,” the person said.
In January, Cloud Software Group conducted another round of layoffs. That same month, Krause sent an email to all employees asking them to voluntarily send him a message at the end of each week “telling me what you accomplished,” according to a copy of the email reviewed by ABC News.
The approach draws on best practices from “two great entrepreneurs and CEOs that lead the most valuable companies in the world,” Krause wrote, naming Musk and Nvidia CEO Jensen Huang.
In a separate email in recent days, Krause told employees that he plans to continue in his role at the company during his time at the Treasury, according to a copy of the email reviewed by ABC News that was first reported by CRN.
“I am honored to serve our country,” Krause wrote. “Let me be clear — as CEO of Cloud Software Group, I am committed to our company and to you, our employees.”
(NEW YORK) — Consumer prices rose 3% in January compared to a year ago, ticking up from the previous month and posing an obstacle for Trump administration tariff policies that many economists expect to raise some prices, government data on Wednesday showed. The inflation reading came in higher than economists had predicted.
The fresh data extends a bout of resurgent inflation that stretches back to last year. Two weeks ago, the Federal Reserve opted to hold interest rates steady in part out of concern regarding the stubborn price increases.
Egg prices, a closely watched symbol of rising costs, soared 53% in January compared to a year ago. An avian flu has decimated the egg supply, lifting prices higher.
Beef prices climbed 5% and bacon prices jumped 6% in January compared to a year ago, data showed. By contrast, prices dropped over that same period for bread, rice and tomatoes.
Core inflation — a measure that strips out volatile food and energy prices — increased 3.3% over the year ending in December, ticking lower than the previous month, the data showed. That gauge also sped up from the previous month.
Inflation has slowed dramatically from a peak in June 2022, but price increases remain a percentage point higher than the Fed’s target rate.
Since Trump took office on Jan. 20, he has announced a series of tariffs, which economists say could push prices higher. Tariffs on steel and aluminum announced by Trump this week could raise prices for a set of products that includes refrigerators, beer and automobiles, experts previously told ABC News.
In a post on Truth Social on Wednesday morning, Trump appeared to fault former President Joe Biden for the uptick in inflation, writing: “BIDEN INFLATION UP!”
Biden served during more than half of the month of January, leaving office on Jan. 20. Trump, however, said during the presidential campaign earlier this year that he would bring down prices “starting on day one.”
This is a developing story. Please check back for updates.
