On January 20, 2025, Mainstreet REALTORS® hosted its annual Economic Forecast event in Rolling Meadows, Illinois.
In addition to learning about the benefits of RPR and Mainstreet's new partnership with Contract2Close.com, more than 200 members heard from the "Bow Tie Economist," Dr. Elliot Eisenberg about his economic predictions for 2025.
The good news? Compared to when he spoke at Mainstreet's Economic Forecast last year, when a lot of the data was uncertain, things are looking up.
Eisenberg shared that in 2024, GDP growth was terrific. Consumer spending was also significant, "We just spent our brains out." He noted government spending was also on the rise, which for now, he deems okay but our deficit is growing.
As we enter 2025, leading economic indicators are up for the first time in 33 months, according to Eisenberg and banks are on the verge of lending again. All good signs of a healthy economy.
However, he does caution to keep an eye on the labor markets, which are softening.
"I'm a little nervous. If we're going to get a recession, it is going to start in the labor markets…The labor market is not weak but it's weakening," Eisenberg said, noting that unemployment is a lagging economic indicator.
In positive news, wage growth is "surprisingly strong" at 3.9% and labor productivity is "crazy good," shared Eisenberg. Minimum wage keeps going up, companies are using more technology and when workers changed jobs "like crazy" in 2021, 2022 and 2023, they generally went for a "stretch job" and got it, meaning they were earning higher wages.
This year, Eisenberg anticipates the Fed will make two to three rate cuts.
From a housing perspective, "It's going to be better this year than last year. The worst was 2023. 2024 has been a little bit better. The major story here is inventory. There isn't any inventory. Inventory is slowly rising but it remains painfully low," he said.
Eisenberg shared that prices don't come down until there are around seven months of inventory in a market. When it comes to residential real estate, he offers hope, "It's going to get better because people can't wait…There's no way sales will be worse last year than they were last year. We habituate and we acclimate."
He concluded that 2025 will be a decent year, the Fed will continue cutting rates, job growth will likely slow and inflation should keep decelerating. If there's anything to watch, he said it is inflation and unemployment.