Home sellers and buyers: What you must know for 2025

Home sellers and buyers: What you must know for 2025

The year promises a mix of good and harsh news.

The good news: Buyers will have more properties to choose from. Home prices won’t skyrocket. Mortgage rates might drop, to the relief of buyers and some sellers.

The harsh news: Even if mortgage rates fall, they probably won’t decline much. That will restrict affordability for buyers, and some homeowners will keep their homes off the market as long as mortgage rates remain elevated.

Here’s a cheat sheet for buying or selling a home in 2025 (or doing both), along with advice from successful real estate agents.

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?

First, mortgage rates: 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.

Mortgage rates parked themselves below 5% for 11 years from February 2011 to April 2022, and home buyers and refinancers grew accustomed to the friendly rate environment. But we’re entering what more than one commenter called the “new normal.” Terri Robinson, a real estate agent with Re/Max Distinctive in Ashburn, Virginia, says buyers “are getting used to the new normal in terms of what interest rates are — and they’ve stopped looking for that 3% unicorn.”

Prices should 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.

Demand for homes still exceeds the supply, but the imbalance isn’t as acute as it used to be. This means home prices will keep rising in 2025, but probably not by a lot, especially while mortgage rates remain above 6.25%.

Home prices might accelerate whenever mortgage rates drop noticeably, as buyers get off the sidelines and start bidding against one another for the limited supply of homes available.

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.

Original Article

Work With Team Gabriel

Get assistance in determining current property value, crafting a competitive offer, writing and negotiating a contract, and much more. Contact us today.

Follow Me on Instagram