Monthly Economic Insights
December, 2024
Looking back at 2024: How housing, inflation, and jobs have changed and where they are likely headed in 2025
As 2024 wraps up, there’s plenty to unpack, especially regarding housing costs, interest rates, inflation, and the job market. While headlines have highlighted national trends, the reality on the ground and in different parts of the country has been more nuanced. The outlook for 2025 also suggests some interesting shifts.
Housing has been a mixed bag this year. For renters, markets like Austin, Raleigh, Denver, and Phoenix saw significant rent declines—some by as much as 10%—due to a surge in apartment construction. Oversupply in these markets and others has led to rent drops and declining occupancy rates.
Looking ahead, the story likely changes. While it appears that 2025 will see fewer new apartments, 2026 might experience an even sharper drop in new construction, potentially causing rent hikes in high-demand areas due to a supply crunch.
On the ownership side, homebuilders performed well despite high mortgage rates and housing prices were +3.9% in 2024 according to the most recent Case-Shiller reading. Single-family housing starts are expected to rise in 2025 (likely driven by a move to smaller, more affordable homes), while multifamily starts are likely to drop—welcome news in oversupplied rental markets.
High interest rates have been a recurring theme in 2024, making borrowing costly for developers, homebuyers, and businesses. The Federal Reserve has been reluctant to cut rates too quickly, signaling a cautious approach. With the quarter-point rate cut this month, the Fed rates are currently in the 4.25%-4.50% range (down from the recent peak of 5.25%-5.50%).
Inflation, meanwhile, cooled considerably in 2024. The most recent reading was 2.7% in November, slightly higher than October, but well below the 3.4% at the end of 2023. While goods prices have stabilized, other categories, like shelter costs and services, remain challenging.
In 2025, inflation is expected to stay under 3% (with the current FED forecast in a 2.1%-2.4% range), barring any unforeseen shocks, such as tariffs or supply chain disruptions. This steadier inflation should ease household pressure and give the economy some breathing room.
Jobs were a bright spot in 2024, with nearly 2 million positions added through November. However, signs of a cooling labor market are becoming clearer. Job openings have declined sharply—down 4.4 million since their 2022 peak—and the “Great Resignation” is officially over. Fewer people are quitting, and wages are starting to moderate in favor of employers (but still high at 4.3% according to the Atlanta FED down from a 6.7% peak in July 2022).
In November, the unemployment rate ticked up slightly to 4.2% from 4.1% in October, remaining higher than the 3.7% rate in November 2023. Projections for 2025 show unemployment inching up to around 4.5%, still within historically low levels.
Bottom Line: There’s reason for cautious optimism in the new year. Housing markets remain strong, inflation seems tamer, and interest rates are moderating. At the same time, though softer, the labor market is not in imminent danger.
If you’re a renter, 2025 could bring more balance before the tide turns upward again in 2026. For homeowners, affordability remains a challenge, but opportunities exist. For all of us, keeping an eye on jobs, wages, and policy changes with a new administration will be key as we navigate the new year.
— Marcus Scott, CFA, CFP®, Chief Investment Officer (CIO) for Country Club Trust Company
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