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Buying a home is a major financial commitment, and if you have some flexibility when it comes to timing, getting a read on the local housing market can help you maximize your savings. While there aren't necessarily good times or bad times to buy a home, understanding market conditions can help you decide the best time for you, personally, to buy.
If you're looking to buy a house in 2025, review these housing market predictions first to get a sense of what to expect.
Will Mortgage Rates Decline in 2025?
As of October 31, 2024, the average interest rate for a 30-year fixed-rate mortgage was 6.72%, according to Freddie Mac. The expert consensus is that mortgage rates will come down in 2025, though it likely won't provide homebuyers significant savings.
| 2025 Mortgage Rate Predictions | |
|---|---|
| Organization | End-of-Year Rate |
| Fannie Mae | 5.6% |
| Mortgage Bankers Association | 5.9% |
| National Association of Realtors | 5.8% |
| Wells Fargo | 5.7% |
| Realtor.com | Upper 5% range |
Note, however, that these predictions are based on present-day economic data and projections of current trends.
Nobody can say for certain where mortgage interest rates will go in 2025. Interest rates may go lower than this range or continue to remain high, depending on further developments with the inflation rate and 10-year Treasury note yield, both of which heavily influence mortgage rates.
Will Home Prices Decline in 2025?
Experts expect home prices to continue to increase in 2025. However, predictions for just how much those prices will climb range from just under 2% to more than 4%, depending on who you ask.
For context, home prices rose by 3.9% year over year as of August 2024, according to data from CoreLogic.
| 2024 Home Price Predictions | |
|---|---|
| Organization | Annual Change |
| Morgan Stanley | +3% |
| National Association of Realtors | +1.8% |
| Fannie Mae | +3.6% |
| Mortgage Bankers Association | +1.6% |
| Goldman Sachs | +4.4% |
Will Inventory Increase in 2025?
With persistently high mortgage rates and home prices, inventory still hasn't returned to pre-pandemic levels, according to the Federal Reserve Bank of St. Louis—though it is on an upward trajectory.
With mortgage rates unlikely to fall significantly, we may not see existing home inventory increase by much. However, another way for inventory to improve is through new construction. According to Fannie Mae, housing starts are expected to be down 5.4% in 2024, but the figure is expected to increase by 1.3% in 2025.
The Mortgage Bankers Association, on the other hand, anticipates that housing starts will be up by 3.3% in 2025.
Will 2025 Continue to Be a Seller's Market?
Even if home inventory continues to increase in 2025, it likely won't be enough to keep up with demand. When supply outpaces demand like this, it's almost always a seller's market.
In a seller's market, buyers face more competition and may need to make an offer above the asking price or waive certain contingencies and seller concessions to have their offer chosen.
Not all seller's markets are the same, however, and there has been a recent decline in bidding wars. According to Zillow, just 17% of sellers have received four or more offers in 2024, compared to 26% in 2022.
Will the Housing Market Crash in 2025?
Based on pricing trends, it's highly unlikely that we'll see a housing market crash next year. However, price increases are expected to cool, especially compared to the blistering pace they set in 2020 and 2021.
Additionally, the inflation rate continues to near the Federal Reserve's target of 2%, making it less likely the U.S. will experience an economic recession.
Should I Buy a House in 2025?
The decision to buy a home is a personal one, regardless of the state of the market. It's important to carefully consider the factors mentioned above, as well as your financial situation, to determine whether you can afford to buy a home.
If current interest rates are putting home prices out of your reach—the median sales price as of the third quarter of 2024 was $420,400, according to the Federal Reserve Bank of St. Louis—it may be best to wait until interest rates come down more.
Learn more >> Should I Buy a House When Rates Are High or Wait?
But if you find your dream home and you can afford it in the current market conditions, it can make sense to take a higher interest rate now and potentially refinance at a lower rate later on.
When Should You Buy?
If you plan on buying, experts say that fall and winter are the best times if you're looking for lower prices. However, inventory is typically lower during those seasons, so you may face stiff competition from other buyers.
Spring and summer tend to have more inventory, especially as parents try to complete the moving process before the start of the new school year. But prices are generally higher at that time of year.
With all of those things in mind, think about your situation and goals to determine the best time for you to buy a new home.
Learn more >> When Is the Best Time to Buy a House?
Consult With a Professional Who Knows Your Local Market
Predictions for the 2024 housing market are just that, and while economists and analysts tend to focus more on nationwide trends, local real estate agents and other professionals have a finger on the pulse of current trends in your area.
If you're thinking about moving in the coming year, don't hesitate to reach out to experts where you live or plan to move. They can help you get a better idea of what to expect and how to maximize your savings on a new home.
Now is also a good time to start preparing your credit history for a home purchase. Review your credit score and credit report to evaluate your credit health and, if necessary, take steps to improve your credit before you start the mortgage process.