For homebuyers, the 2025 version of the housing market presents a mix of challenges and opportunities. On the unfavorable side of the ledger, home prices remain at record highs, and mortgage rates have been hovering around 7 percent. But on the favorable side, inventories are rising, which means buyers have more choices and less pressure to act quickly.
“As rates remain stubbornly stuck close to 7 percent, prospective homebuyers remain hesitant,” says Lisa Sturtevant, chief economist at Bright MLS, a large listing service in the mid-Atlantic region.
Why you should consider buying a home in 2025, according to experts
Here are a couple trends that favor buying, along with two situations that might merit quick action.
Inventories are moving in your favor
At the end of January, there were 1.18 million homes on the market, according to NAR. That was up 16.8 percent from one year ago. Lawrence Yun, NAR’s chief economist, says inventory should climb to 1.5 million homes this spring. “More housing supply allows strongly qualified buyers to enter the market,” Yun says.
In a sign of hope for buyers, the typical home sold in January was on the market for 41 days, the longest period since before the pandemic, NAR says. The combination of more homes for sale and longer selling times means the pressure is lifting for buyers — no longer will you be forced to make an aggressive bid to have any hopes of landing a home.
Mortgage rates are stabilizing
Mortgage rates are much higher than they were during the pandemic. But the good news for buyers is that they’re unlikely to move significantly higher. Fannie Mae expects mortgage rates to drift down to 6.6 percent by the end of 2025. However, there’s not much upside to trying to time mortgage rates. Should mortgage rates drop significantly in the future, refinancing is always an option.
You’re in a good financial position to buy
If you’re financially ready — your credit score is high, your income is solid and you have cash for a down payment — there’s no reason to wait. Home prices have kept rising even as mortgage rates have shot up, a reflection of strong demand and limited supply. The most likely scenario is that home prices will keep rising, so there’s no real benefit from delaying.
You’re buying a new home
President Trump’s proposed tariffs are likely to push new home prices up by about 5 percent by the end of 2025. CoreLogic expects the import duties to bump up new home prices by 4 to 6 percent, and John Burns Research & Consulting expects an increase of 4 to 6 percent in new construction prices as tariffs raise the costs of lumber, drywall, steel and appliances. However, it’ll take a while for those new costs to flow through to the housing market, so buying now, before the tariffs hit builders’ asking prices, could be a smart move.
Why you shouldn’t consider buying a home in 2025, according to experts
There are a couple of reasons why you might want to delay buying:
Home prices are falling in your market
While the national housing market remains expensive, home prices are on the downswing in some parts of the country. In the San Francisco Bay Area, prices were down 6.3 percent from January 2024 to January 2025, according to the California Association of Realtors. In Florida’s Sarasota-Bradenton market, prices were off 5.7 percent from January 2024 to January 2025, according to the Florida Realtors. In Phoenix, prices fell 0.3 percent over the same period, Zillow reports.
If home prices are on the way down, it might make sense to wait and see just how far they fall. Be careful, though — it’s hard to know if price drops are a quick blip or a permanent trend.
You just can’t afford it
The combination of record-high home prices and stubbornly high mortgage rates is discouraging many would-be buyers. Those two factors are making homes unaffordable for many Americans. If you’re not in a position to compromise in terms of location or home size, then maybe it makes sense to keep renting until your financial situation improves.
“With many Americans downbeat on the U.S. economy, affordability challenges, including in the housing space, loom large,” says Mark Hamrick, Bankrate’s chief economic analyst. “Barriers to owning a home are consequential issues.”
If not this year, then when?
With the notable exception of the Great Recession, U.S. home prices nearly always rise. No one expects prices to fall significantly, just because of the ongoing shortage of homes. Builders can’t build quickly enough to keep pace with demand, especially for entry-level homes. And the mortgage lock-in effect is keeping existing homes off the market as few homeowners want to give up those super-low rates they snagged during the pandemic.
When to buy really depends on your individual situation. If you’re waiting to save up for a down payment or to improve your credit score, maybe it’s better to hold off until 2026. And if you’re in a market where prices have been falling, you could see better deals next year — although there’s no guarantee.
What should you do if you’re looking to buy a home in 2025?
1. Determine why you want to buy
Purchasing a home is a major decision that shouldn’t be taken lightly. If you’re not clear on exactly what you want out of homeownership, you could end up regretting your purchase.
2. Check your credit score
Your credit score will help you determine your financing options; lenders use it (among other factors) to set the terms and rates of your loan. The higher your score, the lower the interest rate you will be eligible for — lower credit scores equate to more expensive mortgages.
Learn more: How to check your credit score
3. Save for a down payment
To avoid having to pay private mortgage insurance, or PMI, you’ll need to put down at least 20 percent of the home’s purchase price for a down payment. Some lenders offer mortgages without PMI with lower down payments, but expect to pay a higher interest rate. And be sure to do your research: Many types of loans require a much lower minimum down payment, and there are many government programs to help cover down payment costs for qualified buyers. Shop around carefully based on how much you’re able to pay upfront.
4. Create a housing budget
The purchase price and down payment amount aren’t a complete picture of what to know when buying a house. Setting a realistic budget for your new home will help inform how much you can afford and what your all-in costs will be.
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