2025 housing market: Is it a good time to buy a house?
The Federal Reserve continues lowering short-term interest rates. At its latest meeting on Dec. 18, it once again lowered them by 0.25%. As a result, overall inflation has been cooling in the last two years. And the presidential election has passed.
It would seem that conditions are consolidating for a housing market rebound.
“We’ve seen after presidential elections — and it doesn’t matter who wins — that there’s usually a slight boost in home sales,” Lawrence Yun, chief economist of the National Association of Realtors, said at a recent forum. “It removes some uncertainty.”
But when you examine the 2025 housing market as a whole, including mortgage rates, rising home prices, and an undersupply of houses for sale — is it a good time to buy a house?Understanding the 2025 housing market
Mortgage rates
A major piece of the puzzle? Mortgage rates. While easing lower over the past few weeks, a sub-6% level remains elusive.
In the past year, 30-year mortgage rates dipped to a low of 6.08% in late September but met resistance in breaking lower. According to Freddie Mac, the high-water mark over the same period has been 7.22%.
NAR’s Yun believes that if the government deficit continues, mortgage rates will not go down to the 4% range, as seen in Donald Trump’s first term as president.
“With a large budget deficit, there’s less mortgage money available. The government is borrowing so much of its money,” Yun said.
However, if the government curbs spending, homebuilder regulations are reduced as expected, and jobs continue to grow, “… mortgage rates could come down quickly,” he added. Yun; always the optimist.
Still, housing professionals predict 2025 mortgage rates will remain sticky.
NAR says “a new normal” will be established with rates remaining near 6% next year. Zillow and the Mortgage Bankers Association forecast rates to stay close 6.5%. Redfin expects rates near 7% by 2025’s end.
In other words, not much is expected to change.
Yet mortgage rates remain below their 52-year historical average. Based on data collected by Freddie Mac, the 30-year mortgage rate has averaged 7.72% since April 1971.
For context, the highest mortgage rate on record was 18.63% in October 1981.
Take action: Use a mortgage calculator to determine the monthly payment you can afford. You can then find the home price, down payment, credit score, type of home loan, and mortgage interest rate to get you to your home-buying goal.
Read more: How to get the lowest mortgage rates
Home inventory
The current housing shortage in the U.S. is estimated to be 1.5 million homes by the National Association of Home Builders. Freddie Mac says the home deficit is 3.7 million. Zillow’s latest numbers show we’re 4.5 million houses short. It almost sounds like they’re throwing a dart at board to come up with an estimate.
Whatever the number is, it’s big, and it will take years for home inventory to return to anything close to normal.
“It took us about a decade to get into this housing deficit, and it’s probably going to take us about a decade to get out,” said Rob Dietz, chief economist for the NAHB.
Freddie Mac estimates 5.8 million houses have been added to the market in the past four years. Unfortunately, demand has increased by an equal amount.
Take action: Consider expanding your search to more affordable areas close to your favorite neighborhood if it’s too pricey.
New-home construction
Homebuilder confidence is improving now that the election is over.
“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments,” said Carl Harris, chairman of the National Association of Home Builders.
Realtor.com expects 1.1 million new homes to be built next year. That’s nearly a 14% increase over 2024 — with builders focusing on smaller, more affordable houses.
Take action: If you want to buy a house now, consider new construction. You may be able to choose some finishes or make an even better deal on a spec home that’s been on the market for a while.
Read more: How to buy a new construction home
Home prices
The Freddie Mac House Price Index reported that home values were up 4.2% year over year through August, the latest data available.
“We expect house prices to continue to grow, although at a slower pace,” a Freddie Mac analysis said regarding 2025.
Higher home prices are a direct result of the lack of housing inventory.
However, even with all the headwinds, home sales are expected to grow, if only slightly, in 2025. The consensus among the experts is that some 4 million existing homes will be sold in 2025 — about the same as in 2024.
Take action: Look for homes with price reductions where you want to live. Some apps, like Realtor.com and Trulia, will trigger an alert for sales price adjustments on homes you’re interested in. Then, negotiate even harder.
