The prospect of homeownership has felt increasingly out of reach in the last few years. Prospective buyers face multiple obstacles: soaring mortgage rates, stubbornly high home prices and a scarcity of available homes for sale. Will 2025 finally bring some relief?
Housing affordability isn’t likely to improve dramatically this year, but there are reasons to be hopeful. Though every local market has different challenges, experts predict slight improvements in inventory levels and home prices.
“Overall, buyers can expect a competitive market, but one that offers slightly more opportunities than in recent years,” said Jeb Smith, licensed real estate agent and member of CNET Money’s expert review board
That said, the next several months are full of uncertainty. The Trump administration’s economic policies will affect the Federal Reserve’s monetary decisions, mortgage rates, construction prices, real estate development and homebuyer sentiment.
We talked with several experts about their housing market predictions and how homebuyers should prepare. Here’s what they had to say.
1. Follow what housing market experts are saying
Real estate trends are dynamic and often hard to understand, especially when tracking mortgage movement. That’s why housing market experts and economists always review macroeconomic data to better understand where things are headed.
To become a more informed buyer, keep an eye on what market watchers are saying by reading newsletters or listening to podcasts. Here are some of the experts I follow and podcasts I listen to that help me stay in the loop.
2. Watch mortgage rate trends
While mortgage rates are volatile and fluctuate daily, experts aren’t anticipating any dramatic dips in borrowing costs this year. Since inflation is likely to stay elevated, the central bank is projecting fewer interest rate cuts, which puts upward pressure on the mortgage market.
Most forecasts call for average 30-year fixed mortgage rates to hold above 6.5% for the first half of 2025 and inch down toward 6% by year-end.
Average interest rates reflect what lenders advertise, but there are ways to get lower individual rates on a home loan. Look for different loan terms, negotiate with your broker or try other options, like purchasing mortgage points and buying down your rate.
“While rates are unlikely to return to the record lows of the past, even moderate reductions can help make monthly payments more manageable for buyers,” Smith said.
Securing a lower rate from the beginning, even if by a few tenths of a percentage point, can also save you tens of thousands of dollars in interest over the course of the loan.
3. Create a homebuying budget
If you haven’t already, start budgeting for your down payment and other expenses associated with a home purchase, like closing costs, home insurance premiums and property taxes.
Although the minimum down payment required by most lenders is 3% for conventional loans, experts often recommend making a larger down payment. If you put down 20% of the property’s asking price, you can take out a smaller loan (meaning less debt) and avoid paying private mortgage insurance.
When creating a budget, make sure you can cover your monthly mortgage payment and afford other ongoing expenses and bills, including debt like student loans and credit card balances.
CNET’s mortgage calculator can help you crunch the numbers by entering your credit score, projected down payment and interest rate.
4. Be flexible
In a competitive market, it’s nearly impossible to find a property that meets all your needs and fits within your budget. For example, a house might be in a great location but doesn’t have a big backyard. Consider whether the trade-off is worth it.
“Focus on your ‘nonnegotiables’ like location or commute times, but be willing to compromise on things like square footage or cosmetic features,” Smith said.
If you have the time and financial capacity to make repairs or upgrades, consider a fixer-upper, said Erin Sykes, founder of real estate company Sykes Properties. Older homes or ones in need of renovation tend to have lower price tags. “The homes that are the least negotiable are those that are move-in ready,” Sykes said.
Being flexible on the closing date is another way you can make your offer more attractive, Sykes said.
5. Get ahead of the competition
Many are waiting for mortgage rates to ease before committing to homeownership. Though it can be tempting to hold off until you get the lowest rate possible, remember that home prices are expected to keep increasing. Once mortgage rates start dropping, pent-up homebuying demand will lead to increased competition and even higher prices.
If it makes sense for your budget, purchasing a home sooner rather than later could offer you more negotiating power.
“Consider buying now and refinancing later if rates drop, but don’t stretch yourself to chase a slightly lower rate,” Smith said.
6. Consider new-home construction
Limited resale inventory is directly related to high mortgage rates. The majority of current homeowners aren’t willing to give up their sub-6% mortgage rates (including many under 4%) to relocate, which is leading to a shortage of active listings of preexisting homes.
However, new construction could boost the housing supply. In 2024, brand-new home sales accounted for more than 30% of the single-family home market, compared with about 10% to 12% in years past.
If supply is limited in your area, consider buying new construction, which could offer a more modest price tag and less hassle with bidding. As a way to incentivize buyers, many home builders have been offering discounts and rate-buydowns.
7. Interview multiple real estate agents
The right real estate agent can make a big difference in your homebuying journey. You want someone with good communication skills, connections and experience, but the most important thing is an agent with in-depth knowledge of your particular market who can help you develop the right approach, said Joseph Castillo of Compass Real Estate.
An agent familiar with your area can tell you how realistic your budget is or even point you to more affordable neighboring areas. Start by contacting several local real estate agents to discuss your needs and concerns before settling on one.
8. Explore low-cost loan options
If the upfront cost of homeownership continues to be a barrier, see if you qualify for government-backed loans, grants or down payment assistance programs.
FHA loans, VA loans and USDA loans tend to have lower credit score and down payment requirements than conventional loans. States also provide different types of housing assistance, either through grants or interest-free loans. Check with your state or local housing authority, real estate agent or lender to find out what you may qualify for.
Read more: These 8 First-Time Homebuyer Programs Can Save You Money on Your Mortgage
9. Shop around for mortgage lenders
No matter what’s happening in the market, mortgage interest rates and fees vary widely across mortgage lenders, so you should always shop around. Experts recommend getting at least three loan estimates from different lenders to compare the cost of borrowing and potentially negotiate a lower mortgage rate or better loan terms.
Researching and comparing offers from multiple lenders will not only save you money but will help you find someone aligned with your financial picture and goals.
“While rates are important, they’re not everything. Work with a reputable lender who can help you find a loan product that fits your long-term financial goals,” Smith said.
10. Prepare to wait
If 2025 isn’t the right year to buy a home, that’s OK. You can do plenty of things while you wait to put yourself in a better position when you’re ready.
Improve your credit score. Your credit score is one of the main factors lenders consider when determining whether you qualify for a mortgage and at what interest rate. The minimum credit score for conventional loans is 620, but to qualify for the lowest rates, you’ll want to aim for closer to 740. Paying your credit cards on time (ideally, in full) and staying below your credit limit are great places to start.
Pay down debt. Lenders also take into account your debt-to-income ratio, or DTI. Paying down debt will lower your DTI, which means you’ll be able to borrow more at a better rate. As an added bonus, it will also relieve a major financial burden and give you more room to save for long-term goals, like your down payment.
Save for a down payment. It can take a long time to save up enough cash for a down payment, but you can start small with weekly or monthly savings goals. Consider stowing your cash in a high-yield savings account or certificate of deposit (if you don’t plan to buy in the immediate future) to take advantage of compound interest.
Is it worth buying a home in 2025?
Experts are cautiously optimistic about the housing market in 2025, even though tackling the affordability crisis will take time. Whether it makes sense to buy or wait is a question only you can answer. Instead of trying to time the market, focus on your personal situation.
“If you’re financially ready and plan to stay in the home long enough to make it worth the investment, now is a great time to buy,” Smith said. “Trying to wait for lower prices or interest rates could cost you in the long run because both are unpredictable.”
More on today’s housing market
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