What’s Shaping the 2025 Housing Market? with Ivy Zelman

As we kick off 2025, I’ve been fortunate to sit down with some of the brightest minds in housing, economics, and policy. I had the pleasure of hosting my colleague and one of the most respected housing analysts in the country, Ivy Zelman. Ivy’s insights constantly challenge my thinking and offer a lens into our industry's key trends and challenges.

Here are some of the most compelling takeaways from our discussion about the housing market’s future.

The affordability challenge: more than a numbers game

Ivy made it clear that the housing market’s greatest hurdle isn’t just about supply—it’s about affordability. With 75 percent of American homeowners locked into mortgages below 5 percent, fewer existing homes are hitting the market. With mortgage rates projected to remain “higher for longer,” affordability is stretched across the board.

Even new housing developments aren’t immune. Builders are struggling to match price points with what consumers can realistically afford. Inventory might exist, but absorption remains sluggish without significant price adjustments or incentives.

Takeaway: Building more housing is not enough—we need to focus on delivering homes at price points that align with buyers’ incomes.

Public builders on the rise

One of the industry's most striking shifts is the growing dominance of public homebuilders. Today, they produce 54 percent of new homes—up from a single-digit market share when Ivy began covering the sector three decades ago. Their access to cheaper capital and ability to scale operations gives them a distinct edge over smaller, independent builders, who often struggle with rising costs and regulatory hurdles.

What does this mean for the future? Ivy believes independents must focus on niche opportunities or consider partnerships with public builders to stay competitive.

Labor shortages and immigration’s ripple effects

Labor availability continues to weigh on the industry. Ivy pointed to the aging workforce and the potential for disruptions in subcontracting due to immigration-related challenges. While larger builders are better positioned to weather these disruptions, smaller players find securing skilled trades increasingly difficult.

This labor shortage further complicates efforts to accelerate housing production, reinforcing the need for creative solutions at both local and national levels.

Policy changes that could make a difference

When I asked Ivy what she’d focus on if she were advising policymakers in the White House, she didn’t hesitate:

1. Reduce impact fees: These fees, which cover infrastructure costs like schools and fire stations, can add up to 15 percent of a home’s price in high-cost areas like California.
2. Adjust FHA loan limits: Localizing FHA limits to reflect regional price differences could expand access to financing in high-cost markets.

These changes could significantly lower barriers for both builders and buyers.

Multifamily and single-family rentals: opportunity or challenge?

One might assume that rising home prices and limited inventory would spur explosive growth in the rental market. However, Ivy explained that while demand is strong, rent growth has slowed for both multifamily and single-family rentals. The underlying issue? Affordability. The same dynamics constraining homebuyers are also pricing out renters.

What’s next for housing?

As Ivy and I wrapped up our conversation, it was clear that 2025 will require collaboration, innovation, and policy action to tackle the industry’s affordability crisis. While challenges like labor shortages and regulatory hurdles persist, this sector's resilience and creativity remain a constant source of optimism.

Want more?

I’m incredibly grateful to Ivy for joining me on the Walker Webcast and sharing her unparalleled insights. If you haven’t already, I highly recommend diving into Zelman’s Housing Macro Forecast for even more detail on where the market is headed.

For more engaging conversation and debate about all things CRE, subscribe to the Walker Webcast.