Monthly Economic Insights
January 31, 2025
Economic Insights
Past performance and new predictions for housing, interest rates, jobs, and inflation
In this first month of 2025, we examined how the Kansas City area and the surrounding Midwest compare to national averages across key indicators such as housing, interest rates, inflation, and employment.
A strong U.S. dollar, healthy corporate earnings, lower inflation, and a new administration add to a reasonably positive outlook for 2025. But let’s take a closer look at where we’ve been and where we’re likely to be going over the next year.
Housing and interest rates
In 2024, the U.S. housing market saw home prices rise by 6.03% year over year, reaching a median price of $404,400 (according to the National Association of Realtors). In Missouri, the median price hit $271,200. According to real estate firm Redfin, home sales increased by 11.4%, and the inventory of homes for sale grew by 12%.
The total value of U.S. homes reached a historic $49.6 trillion, gaining $3.1 trillion over the year. While market activity surged, high housing payments and affordability challenges still tempered sales growth, with many potential buyers turning to renting instead.
Looking ahead, the National Association of Realtors has identified Kansas City as one of the top 10 housing market hot spots for 2025. Factors contributing to this outlook include stabilizing mortgage rates around 6%, increased housing inventory, and continued job and income growth, which are expected to boost buyer activity.
The association forecasts nationwide home prices will rise slower, reaching a median existing-home price of $410,700. Kansas City's affordability and growth potential will make it a focal point for prospective buyers and investors in the coming year.
In 2024, the Federal Reserve also cut interest rates several times, lowering the federal funds rate from a peak of 5.25%-5.50% to a range of 4.25%-4.50%. In 2025, the Fed projects a more cautious approach, with plans to reduce rates by approximately 50 basis points, subject to change based on economic data.
Employment
In 2024, the U.S. labor market remained robust. The unemployment rate remained steady at 4.1% in December, a slight decrease from 4.2% in November. The rate fluctuated between 3.7% and 4.2% throughout the year, reflecting a slightly softer employment environment. Comparatively, the Kansas City area unemployment rate is currently at 3.3%.
In December, the national economy added 256,000 nonfarm payroll jobs, with significant gains in health care, government, and social assistance sectors. Over the year, total nonfarm payroll employment increased by approximately 2.2 million, averaging a monthly gain of 186,000 jobs.
Projections indicate that the national unemployment rate will remain relatively stable in 2025, with fluctuations expected between 4.1% and 4.3%. This outlook suggests a continuation of the current labor market strength, supported by moderate economic growth and job creation.
Inflation
In 2024, U.S. inflation moderated overall. The CPI rose 2.9% in December, and core inflation was 3.2%. Energy prices decreased, while food prices increased.
As of December 2024, the Midwest's CPI increased by 0.2% from the previous month. Over the 12 months ending in December 2024, the Midwest experienced an inflation rate of 3.0%.
Nationwide, inflation is predicted to remain slightly above the Federal Reserve's 2% target in 2025 (the FED is estimating 2.5%) due to potential new tariffs and price pressures in services and housing.
Bottom Line: Kansas City and the Midwest region are generally aligned with nationwide trends in housing, interest rates, jobs, and inflation. While housing affordability and employment growth are positive aspects, ongoing concerns about inflation, Fed rate cuts, and new economic trade and spending policies from Washington, D.C., will warrant a cautiously optimistic economic outlook in 2025 for our region and the country.
— Marcus Scott, CFA, CFP®, Chief Investment Officer (CIO) for Country Club Trust Company
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The opinions and views expressed herein are those of the author and do not necessarily reflect those of Country Club Trust Company, a division of Country Club Bank, or any affiliate thereof. Information provided is for illustrative and discussion purposes only; should not be considered a recommendation; and is subject to change. Some information provided above may be obtained from outside sources believed to be reliable, but no representation is made as to its accuracy or completeness. Please note that investments involve risk, and that past performance does not guarantee future results.