2025 Real Estate Trends You'll Want To Know About

If you're preparing to buy a home in the next year, listen up: Several experts on the U.S. housing market have announced their predictions for 2025. "Compared to this time last year, rates are elevated and the market's affordability headwinds persist. However, buyers appear to be more inclined to get off the sidelines as pending home sales rise," explains Sam Khater, chief economist at Freddie Mac. A 30-year fixed-rate mortgage averaged 6.91% in the first week of 2025, its highest since July of that year. J.P. Morgan Research anticipates a drop to 6.7% by late 2025, with home prices rising 3% over the course of 2025. That's an increase of nearly $12,600 for a home valued at the national median of $419,200. What does all of this mean? Homes may be a little more affordable for some buyers, but many first-timers will struggle to purchase if inventory remains low. 

When few homes are on the market, prices increase and there's more competition for what's available. People with less buying power tend to fare the worst in this situation. Typically, first-time buyers don't have as much purchasing power as those who have already built equity with a home. Increasing purchasing power for homebuying typically involves shrinking debts, building a strong credit score, and establishing a low debt-to-income ratio. Reaching these goals takes time, effort, and lots of money. If mortgage interest rates don't decrease as much as forecasters expect, the housing market may feel as challenging as ever for people who need to borrow money to purchase their home sweet home. If rates do drop, buyers eager to seal the deal must be ready to act.

The conventional advice for first-time home buyers is to research available government programs for initial home purchases, budget carefully, and find the best possible mortgage for their circumstances. Meanwhile, seasoned buyers should also spend within their means and research different mortgage options if they plan to finance their purchase. That said, mortgage rates are particularly tricky to navigate right now.

One complicating factor is homeowners sitting on low mortgage interest rates. These rates began a fast, steep climb after reaching historic lows in January 2021. Since then, people who took on new mortgages or refinanced existing ones when rates bottomed out have been reluctant to sell. According to the Consumer Financial Protection Bureau, about 60% of active mortgages have rates between 2.65% and 4%. Even if a homeowner wants to move, it doesn't make sense for them to trade a mortgage at 2.65% interest for one at nearly 7%. If rates continue to decline in 2025, some of these would-be sellers might put their homes on the market. Plus, if people see a downward trend in interest rates, they may feel confident about refinancing a high-interest mortgage to a more comfortable rate in the near future. 

If you're a prospective buyer, watch for signs of increasing housing inventory in communities you're targeting. Some real estate marketplaces offer inventory reports that can help you keep tabs on the situation. Even if home prices don't drop immediately when inventory starts growing, sellers may be willing to accept lower offers than before. A good real estate agent should have helpful insights about the inventory trends in the area where you're looking to buy.