The Big Picture
Following a year defined by housing market and inflationary concerns, 2025 is set to operate within a landscape shaped by anticipated steady economic growth influenced by recent political shifts and a persistent need to address housing affordability challenges.

 
JP Morgan produced a commercial real estate outlook predicting that the Federal Reserve's "higher-for-longer" interest rate policy, aimed at reducing inflation to 2%, will maintain pressure on developers as financing costs remain elevated. This challenging macroeconomic environment will likely limit expansion opportunities yet encourage efficiency and strategic investments.

The Congressional Budget Office (CBO) suggests that the U.S. federal deficit is projected to equal 6.5% of GDP in 2025, reflecting ongoing fiscal challenges. Rising federal debt, which is expected to approach 122% of GDP by 2034, highlights concern about long-term economic sustainability and could lead to stricter fiscal policies in the future. These factors may reduce government investment in infrastructure and affordable housing programs, creating additional challenges for developers reliant on public funding.

Donald Trump's return to the presidency following the 2024 election - alongside a Republican-controlled Senate and House - marks a shift in federal policy priorities. The National Association of Home Builders (NAHB) reports that President-Elect Trump pledges to eliminate excessive regulations that are estimated to increase the cost of new single-family homes by 25% and multifamily developments by 40%. This deregulatory approach could incentivize private-sector investment in residential construction and expedite project timelines. At the same time, bipartisan consensus on addressing housing affordability signals on-going efforts to expand housing supply.

JP Morgan's report also reveals that the multifamily sector will continue to perform well, supported by innovative financing models and growing demand for workforce housing. Developers are increasingly exploring solutions that extend housing access to households across a wider income range, beyond traditional affordable housing programs. Furthermore, the commercial real estate sector - particularly office space - will continue to face high vacancy rates, limiting opportunities for growth in this segment. However, industrial and retail properties are expected to remain stable, presenting opportunities for developers in these sectors.

Housing affordability will remain a key priority for policymakers and developers alike. The NAHB's successful lobbying efforts during the 2024 elections, combined with federal deregulatory policies, are likely to reduce costs and increase the feasibility of new housing projects. However, interest rates and fiscal constraints could temper these efforts, emphasizing the need for innovative solutions.
tinyurl.com/CBO-Econ-24, tinyurl.com/JPM-Econ-24 tinyurl.com/NAHB-Econ-24