The 2025 housing market is shaping up to be a year of opportunities and challenges. As we enter a new presidential administration and navigate international events impacting the global economy, several key factors will influence the real estate landscape.
Three major trends—mortgage rates, home prices, and inventory levels—are expected to define the market. Here’s what you need to know to prepare for buying, selling, or refinancing in 2025.
Mortgage Rates: What to Expect
Throughout 2024, the Federal Reserve maintained its federal funds rate around 5% to manage inflation. Although a 0.5% cut in September temporarily reduced rates, they quickly rebounded due to global economic factors.
Experts predict mortgage rates will stabilize in 2025 but remain higher than previous lows. Here’s what the experts forecast:
- National Association of Realtors® (NAR): Rates around 6%.
- Mortgage Bankers Association (MBA): Between 6.4% and 6.6%.
- Realtor.com: Average of 6.3%.
- Fannie Mae: Average of 6.4%.
While rates might not return to pre-pandemic lows, strategies like Rate Reduce or paying points can help lower monthly payments.
Tips to Manage Higher Rates
- Rate Reduce Programs: Sellers provide upfront deposits to temporarily lower your interest rate, reducing initial monthly payments.
- Adjustable-Rate Mortgages (ARMs): Begin with a lower fixed rate for 5-10 years before switching to a variable rate.
- Paying Points: Buy down your interest rate upfront to save money over the loan’s lifetime.
Remember: “Date the rate, marry the house.” Rates can change, but finding the right home matters most.
Home Prices: Slower Growth Ahead
Home prices are expected to continue rising in 2025, albeit at a slower pace compared to 2024. Expert predictions include:
- NAR: 1.9% increase.
- MBA: 2.9% increase.
- Realtor.com: 3.7% increase.
- Fannie Mae: 3% increase.
- Freddie Mac: 0.6% increase.
While these increases are smaller than 2024’s 4.3% rise, buyers may still face challenges. First-time homebuyers should explore down payment assistance programs to make homeownership more accessible.
Inventory Levels: A Welcome Boost
After years of tight housing inventory, 2025 is expected to offer buyers more options. Realtor.com predicts an 11.7% increase in housing inventory, which would bring supply to around 4 months—a level nearing a balanced market (4-6 months of supply).
While more inventory means buyers have more time to make decisions, acting quickly is still critical. Tools like PowerBid Approval and Same Day Mortgage can give you a competitive edge when you find the perfect home.
How to Prepare for the 2025 Housing Market
To make the most of the 2025 housing market, follow these steps:
- Check Your Finances: Assess income, debt, and savings to determine your budget.
- Improve Your Credit Score: A higher score can lower your mortgage rate.
- Get Preapproved: Start your home search with a PowerBid Approval for faster offers.
Conclusion: Is 2025 Your Year to Buy?
The 2025 housing market offers promising opportunities with increased inventory and manageable price growth. While mortgage rates may remain elevated, strategies like ARMs or Rate Reduce programs can help ease the financial burden.
Let’s connect! At Crimson Realty, we understand the unique trends shaping the market and are here to guide you every step of the way. Reach out today to start preparing for your 2025 home-buying journey.