Preparing for the housing market in 2024

As we prepare for the housing market in the upcoming year, it can be a fool’s errand to try and predict what will happen. That’s especially true in 2025, as we prepare for a new presidential administration to take office and there are more than one international conflicts whose direction can affect the global economy.

There are however, three main storylines that will define your homebuying journey in 2025 – mortgage rates, home prices and the number of homes for sale, also known as inventory. The good news is that each of them offer us a trendline that we can extrapolate into the new year and hopefully glean some insights about what we can expect in 2025.

Are you thinking of making 2025 the year to buy a home or refinance your mortgage? Start by getting preapproved, or read on to learn what’s likely to shape the housing market in the new year.

Rates up or down?

When looking back over the last twelve months, the one thing that stands out in the housing market is waiting for mortgage rates to come down. The Federal Reserve had been maintaining its benchmark federal funds rate around 5% in order to bring inflation down. This is the interest rate that banks use when lending to each other, and it affects many parts of the economy, including mortgage rates in an indirect way.

The Fed’s first cut wasn’t until September, when they announced a 0.5% cut. Mortgage rates came down to their lowest point of 2024 in anticipation of that cut. But in the months since, mortgage rates have gone back up in reaction to news from all over the globe.

Mortgage rates are incredibly hard to predict, as so many elements are considered when lenders decide on them. That’s in addition to the factors in your control that can end up affecting the rate you get, like your credit score. So, we’ll include a roundup of the views of other housing market experts.

National Association of Realtors® (NAR):

Mortgage rates around 6%

“Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%. That will be the new normal, bouncing around 5.5%-6.5%.” – Lawrence Yun, NAR Chief Economist

The Mortgage Bankers Association (MBA):

Mortgage rates between 6.4% and 6.6%

The MBA revised their mortgage rate prediction upward between October and November after seeing how rates responded to the Fed’s September cut.

Realtor.com:

Mortgage rates to average 6.3%

“Mortgage rates are expected to keep mortgage payments essentially unchanged in 2025 despite continued home price growth.”

Fannie Mae:

Mortgage rates to average 6.4%

The economists at Fannie Mae also revised their mortgage rate prediction upward between October and November “given the rise in bond rates since the September Federal Open Market Committee (FOMC) meeting.”

Dealing with higher rates

Given the amount of these expert predictions that were revised upward during the fall of 2024, it seems like many homebuyers may be disappointed in how low rates could go in 2025. But that doesn’t mean that there’s nothing you can do to get a lower rate.

Here are a few ways you could bring your rate down:

• Rate Reduce: This temporary buydown allows you to keep your payments low with the help of the seller. An upfront deposit at closing allows your mortgage rate to essentially be “bought down” for a specified period of time. We offer five different Rate Reduce programs to help you ease into your new home and mortgage payment as you build equity.
  
• Adjustable Rate Mortgage (ARM): ARMs offer the potential for lower monthly payments at the beginning of the loan. With an initial fixed-rate period (usually for five, seven or 10 years) featuring a low introductory rate, it is followed by a variable-rate period for the remainder of the loan.
  
• Paying Points: You can save on your monthly mortgage payments by paying a little more at the beginning of the loan. This is known as buying down the rate or paying points. You pay your lender extra money up front — on top of your closing costs and down payment — and in return, they will reduce your mortgage rate. This could save you thousands over the life of the loan.
  

No matter what happens with mortgage rates this year, remember this wise saying: Date the rate, marry the house. There are many ways you can improve your mortgage rate situation, particularly with a refinance. But when you find a house you love, don’t wait for mortgage rates to come down because you don’t want to miss out.

Home prices likely to keep heading up

One of the reasons that homeownership is such a smart financial decision is that the value of homes keeps going up. And while that’s great news for homeowners, that makes it harder for homebuyers, particularly first-time homebuyers. That trend seems likely to continue in 2025.

A survey of different expert predictions compiled by HousingWire revealed an average of a 2.72% increase in home prices. Here’s what various experts are predicting:

NAR: 1.9%
MBA: 2.9%
Realtor.com: 3.7%
Fannie Mae: 3%
Freddie Mac: 0.6%

All of those predictions show less price growth than we saw in 2024, when home prices increased by 4.3%. While home prices are still going up, it’s good news for buyers that they are rising at a slower pace.

Outsmarting higher home prices

Higher home prices can make saving for a down payment feel challenging, but we’re here to help. From state and federal programs to options tailored to specific neighborhoods or occupations, there are plenty of down payment assistance programs designed for first-time homebuyers. Connect with a local lending expert to explore your options and take the first step toward homeownership.

Good news on finding a home to buy

After years of homebuyers frustrated by how few options they’ve been able to find on the market, 2025 is shaping up to present a stark departure from recent trends. The lack of homes for sale not only makes it hard to find a home you’ll love but drives up competition and home prices. The trend from the second half of 2024 has given us hope that more homes will come on the market in 2025.

Realtor.com is predicting that housing inventory will grow by 11.7% in 2025. “While more inventory means buyers will likely have more time to make purchase decisions in 2025, in any market, a fast-acting buyer will have a higher likelihood of making the winning offer,” says Realtor.com Chief Economist Danielle Hale.

This will be the equivalent of around 4-months’ supply of inventory. Economists agree that a balanced market typically has a supply of 4 to 6 months, a range that we haven’t seen for years.

While more homes for sale is great news for a market starved for them, it stills pays off to move fast to beat your competition. That’s why we recommend starting your home search by getting a PowerBid Approval, so you’re ready to make an offer when you find the home you love. And pairing that with our Same Day Mortgage will allow you close quickly, as well.

Are you ready for the 2025 housing market?

As we look ahead, many housing experts are optimistic that 2025 could bring some positive changes to the market—particularly with mortgage rates. However, challenges remain. That’s why preparation is key this year.

Start with guidance from a local lending expert who understands the unique trends in your area. Together, these tools can help you navigate the 2025 housing market with confidence. Here’s to a successful year ahead!

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply. Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.