Planning to Buy a Home in 2025? Must-Know Tips for Savvy Buyers!

Get ready for a game-changing year in the housing market! After a rollercoaster ride of soaring prices and skyrocketing mortgage rates, 2025 is set to offer more options for homebuyers who’ve been sidelined for too long.

Imagine the relief as mortgage rates begin to ease, an uptick in home listings provides a smorgasbord of choices, and price growth finally hits the brakes. Here’s your must-know guide if you’re eyeing that dream home.

Mortgage Rates May Fall, But Not By Much

After hitting rock-bottom during the pandemic, mortgage rates have bounced back to the 6% to 7% range, putting a damper on many potential buyers’ hopes.

A glimmer of hope is on the horizon as mortgage rates may stabilize just above 6% next year, according to economists. While it’s not a significant drop, it could open the floodgates for some buyers.

The 10-year Treasury bond yield, a barometer of investor confidence and inflation expectations, could keep mortgage rates relatively high in 2025. This is crucial since most mortgages mirror the trajectory of the yield.

“Most homeowners refinance or sell their homes within a decade, which means mortgage rates closely follow the 10-year treasury,” experts note.

If inflation remains stubborn, we might see yields stay elevated. However, there’s optimism that yields could dip as low as 3.5% in 2025. Currently, the yield has been hovering around 4.5% since the Federal Reserve’s last meeting.

You Could Have More Options

As mortgage rates inch down, more homeowners may feel inspired to list their properties.

Many homeowners are reluctant to sell and give up the ultra-low rates they secured during the pandemic. In fact, a staggering 85% of mortgage borrowers currently have rates lower than what the market offers today. This has effectively locked many into their homes, squeezing available inventory and driving up prices.

Life changes—think divorce, new additions to the family, career moves—are significant motivators pushing these homeowners to finally put their homes on the market.

For the first time in nine years, the housing market is expected to balance out with a projected 11.7% increase in existing homes for sale in 2025, making it a promising year for buyers!

Prices Won’t Rise As Rapidly

The month’s supply is a pivotal indicator of how quickly homes are selling. A supply under four months denotes a seller’s market. Expect this to improve from an average of 3.7 months in 2024 to 4.1 months in 2025.

If the market meets the projected inventory levels, we might see less competition and a moderation in prices. The new year is set to bring the highest inventory of homes for sale since December 2019, with about 20% of listings expected to have price cuts.

“Despite 2024 being unexpectedly competitive due to affordability issues, more available inventory should provide buyers with much-needed breathing room in 2025,” said a chief economist from a well-known real estate platform.