It’s tough to say where the economy is headed in 2025. Many of President-elect Donald Trump’s proposed economic policies, such as tariffs and mass deportations, are likely to weaken the broader economy while pushing inflation and interest rates higher.
LendingTree's predictions for the housing market and economy in 2025 were made in the face of more uncertainty than usual. They consider what might happen if things continue along their current course, and what could happen if Trump makes good on campaign-trail promises. Here's what our senior economist, Jacob Channel, predicts for the year ahead.
- Mortgage rates will remain relatively steep and erratic, and they may climb higher than current levels. Though Trump has promised to lower mortgage rates, borrowers shouldn’t expect them to fall to anywhere near their record 2021 lows or even as low as at the start of 2022.
- If President Trump’s economic policies look like candidate Trump’s proposals, expect inflation to trend higher. If Trump’s policies are as severe as they sound, year-over-year inflation growth could climb to 3% or 4% over the year — and perhaps even higher in 2026 and beyond.
- Home prices will rise slightly, while mortgage demand will remain stagnant. Policies such as mass deportations could make it considerably more difficult and expensive for builders to construct homes. Should builders have to contend with extra costs, they’ll likely build fewer homes and charge higher construction prices.
- The Fed could end its current rate-cutting cycle earlier than expected. If the administration’s policies are inflationary, the Fed may have no choice but to prematurely end its rate-cutting cycle.
- The economy may weaken, but the U.S. could still avoid a recession — at least in the short term. While tax cuts could stimulate economic growth in 2025, the disruption caused by tariffs and mass deportations will likely (eventually) cause the economy to slump. Even if we avoid an outright recession in 2025, one could still be on the horizon in 2026 or beyond.
You can check out the full report—as well as an expanded list of potential economic positives and negatives ahead this year — here: https://www.lendingtree.com/home/mortgage/housing-economy-expectations-study/
