The Year Ahead for Home Sellers and Buyers: A Cheat Sheet for 2025
Folks Get Real About Mortgage Rates
Buyers have one overriding question for 2025: "Can I find a home I can afford?" Three other questions lurk inside that one: What will happen to mortgage rates? What will happen to home prices? Will I find a wide-enough selection of homes?
Mortgage Rates Will Remain Above 6%
The 30-year mortgage rate spent much of 2024 above 6.5%, occasionally shimmying above 7%. For most of the year, forecasters expressed confidence that rates would fall below 6% in 2025. But since the election, forecasters have begun revising their mortgage rate predictions upward. They’re forming a consensus that mortgage rates will remain above 6% in 2025.
Prices Will Rise, But Not by a Ton
When it comes to home prices, we talk of supply and demand. In 2024, buyers quickly made offers when mortgage rates dropped to around 6.25% or lower. Demand cooled when rates climbed above that. As rates rose, homes lingered on the market. According to Altos Research, there were 28% more homes on the market in the first week of November than the same week a year before. Higher inventory benefits buyers because they have more properties to choose from.
The Housing Shortage May Ease
You can trace the shortage of homes to a couple of factors. First, builders haven’t constructed enough houses and apartments in the last 18 years or so. Second, many homeowners keep their homes off the market because they refinanced into mortgages with ultralow rates in 2020 and 2021. Almost half of outstanding mortgage debt has an interest rate of 3.5% or lower, according to the Urban Institute.
Advice for Home Sellers
Home sellers will continue to have a negotiating advantage over buyers. But sellers’ dominance has slipped since 2021, and they must put in the work to market their homes effectively. "Stop thinking you hold all the keys to the castle," says Andy Sachs, managing broker for Around Town Real Estate in Newtown, Connecticut.
Advice for Home Buyers
Buyers, on the other hand, should search first for deal-breaking flaws before focusing on a home’s delights, agents say. Victoria Ray Henderson, owner and broker of HomeBuyer Brokerage in Bethesda, Maryland, says, "Don’t just go into the kitchen and go, ‘Wow, look at this granite countertop!’ You know, you gotta look at the bones first."
Conclusion
The year ahead for home sellers and buyers promises a mix of good and harsh news. While mortgage rates might drop, they probably won’t decline much, which will restrict affordability for buyers, and some homeowners will keep their homes off the market as long as mortgage rates remain elevated.
Frequently Asked Questions
Q: What will happen to mortgage rates in 2025?
A: Mortgage rates are expected to remain above 6%.
Q: What will happen to home prices in 2025?
A: Home prices will rise, but not by a ton.
Q: Will there be more homes available for sale in 2025?
A: Yes, there will be more homes available, but the shortage may ease.
Q: What can home sellers do to market their homes effectively?
A: Home sellers should stop thinking they hold all the keys to the castle, and instead, work with their agents to price their homes reasonably and highlight any updates made to the property.
Q: What can home buyers do to find the right home?
A: Home buyers should search for deal-breaking flaws first and then focus on a home’s delights. They should also consider getting a pre-offer home inspection.
