As the year just started, it’s a wonderful time to start looking at where the real estate market stands, and where it’s heading. As we all know, mortgage rates sat somewhere below 5% on average from 2011 to early 2022, and borrowers became used to low rates.

But in the last couple of years, rates have risen dramatically, peaking at over 8% in October 2023. When the Federal Reserve started cutting interest rates in September 2024, plenty of home buyers and refinancers expected mortgage rates to follow.

But guess what? The opposite happened. Mortgage rates have gone all the way up from 6.35% in early September to the current average rate of 6.85%. Right now, homeowners are facing a new reality: the rates in the 5% and 6% range might be the new “low.”

Rates are still expected to drop this year, which could be more than enough to motivate buyers on the sidelines to reenter the market. House inventory also increased in many markets, and while it’s still not enough to meet buyer demand, it’s still enough to boost market activity.

Experts also anticipate modest price gains in 2025. For instance, real estate data provider CoreLogic predicts that home prices will increase at a modest annual rate of 2.3% through September 2025.

In return, the current market might be a bit tricky for home buyers to navigate, which makes it tough to decide whether it makes sense to buy a house this year.

Should you buy anything this year?

So, the question is: should you buy a house in 2025? According to real estate experts, the answer is different for each case, and it’s mainly driven by your financial situation and how it stands against the current market conditions.

Why you should buy

For one, more homes on the market could create better opportunities for buyers. A higher inventory also means fewer bidding wars, which means that home prices are more stable. Falling mortgage rates could ease the cost of buying a new home, even if it might take some time.

As Jeremy Schachter, branch manager at Fairway Independent Mortgage, stated, “I expect interest rates to stabilize and slowly come down from the middle to the end of 2025.”

When that happens, affordability could slightly improve. However, as more sellers list their homes, the rising inventory makes it less likely for buyers to deal with competition. Since many sellers lose their patience waiting for rates to drop due to their own housing needs, more homes will appear on the market.

Whether you are currently downsizing as an empty nester or you simply need another room for a growing family, sellers slowly realize after two and a half years of rising rates that it’s time to give in and get rid of the low-rate mortgage to finally address their housing needs.

If, however, housing inventory starts to rise and mortgage rates ease, you can benefit from buying a home this year. But this would imply you have solid finances stocked up, which would also mean a reasonable down payment saved, debt under full control, and a stable job. If all of these are checked, then yes, buy a house this year.

Buying a home can lock in all your housing costs, which is, at the end of the day, an obvious win, especially when rents keep climbing. Depending on where you’re looking, you might notice prices stabilize or soften.

In the end, buying a home in 2025 makes sense only if your finances are strong. It’s also fairly important to stay informed about various market conditions. You could benefit from waiting a couple of months.

The best approach is to hold off buying until later in the year, especially in the fall. Then, mortgage rates are expected to drop once more with home prices. The only risk is that the market keeps dropping after you buy.

Why you shouldn’t buy a home this year

If it isn’t affordable, don’t. Try to take into account all the costs you would have to incur, including closing costs, mortgage payments, homeowners insurance, property taxes, as well as maintenance.

If high mortgage rates end up being unbearable monthly payments, waiting is the best option right now. As Schachter advised, “affordability is a huge issue in the housing market. Increased rates on mortgages, but also higher insurance costs, make the mortgage payments unobtainable or simply out of reach.

Homebuyers might want to consider holding off on purchasing a home, as long as the rates are too high to qualify for the house they wish for.” You might also want to rethink purchasing a home in 2025, as long as the market conditions don’t drastically change to make it worth the effort.

The market in 2025 is bound to be tricky. Interest rates could stay high up, and in certain areas, inventory is tight, keeping prices too elevated. Let’s be honest: if the math doesn’t work, buying a home would stretch you too thin financially; renting or exploring other ways to grow your wealth is more advised in this case.

The benefits of buying

It could be beneficial to wait a bit longer for mortgage rates to drop before buying a home. On the other hand, buying a new home could come with plenty of benefits, especially if you anticipate rising costs in your area.

Locking in your housing costs today could save you a ton of money if home prices or rents go too high. You could also benefit from a slower market if you buy a home in early 2025. According to Freddie Mac, the market tends to slow down a bit during the winter months, which also means fewer buyers to deal with and more motivated sellers.

Takeaway

Deciding when is the best time to buy a home is definitely challenging. However, the secret is to make sure at all times that your finances are strong enough to move forward with the purchase. Whether you want to sleep on it a bit longer or simply wait, you can still prepare by improving your credit, as well as getting preapproved for a mortgage.

As far as buying a home this year goes, it’s also important to factor in your long-term financial goals and personal circumstances. Besides the aforementioned high interest rates and potential home prices, a couple of key aspects should always be present on your radar.

First, since remote work has become increasingly more prevalent, this can also impact the types of homes buyers are interested in, with more focus on properties that have home offices and spaces for flexible living arrangements.

Moreover, sustainability and energy efficiency are also key when it comes to home buying. More and more clients look for homes with eco-friendly features, such as solar panels, energy-efficient appliances, and better insulation. Their main goal is not only to reduce environmental impact but also to save on long-term utility costs.

Another aspect worth considering is the potential for technological advancements as far as home-buying goes. Digital home tours, virtual reality staging, and AI-driven property recommendations could make the process smoother and more accessible, especially if you’re a first-time buyer.

Ultimately, what matters is to have the best understanding of your local real estate market. While national trends provide an effective, broad view, local economic conditions can also impact availability.

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