Over the past two years, high mortgage rates, high home prices and limited housing inventory have kept potential homebuyers locked out of the market. As we start the year, many are wondering if 2025 will be a better time to buy.
While housing affordability is unlikely to improve much this year, there should be greater supply and moderate house price growth.
“Overall, buyers can expect a competitive market, but one that offers a little more opportunity than in recent years,” said Jeb Smith, licensed real estate agent and CNET Money expert board member.
At the same time, 2025 will be filled with uncertainty, with an incoming political administration, new economic policies, and monetary decisions by the Federal Reserve. We spoke to several experts about their housing market predictions and top tips for today’s homebuyers. Here’s what they had to say.
1. Follow what the housing market experts are saying
Real estate trends are dynamic and often difficult to understand, especially when tracking mortgage movement. That’s why housing market experts and economists are always looking at macroeconomic data to better understand where things are going.
To become a more informed buyer, keep an eye on what market watchers are saying by reading newspapers or listening to podcasts. Here are some of the experts I follow and podcasts I listen to that help me stay informed.
2. Look at mortgage rate trends
While mortgage rates are volatile and fluctuate daily, experts are not predicting any dramatic drop in borrowing costs this year. As inflation is likely to remain 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 stay above 6.5% for the first half of 2025 and decline to 6% by the end of the year.
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 buying mortgage points and buying your fee.
“While rates are unlikely to return to past record lows, even moderate reductions can help make monthly payments more manageable for buyers,” Smith said.
Securing a lower rate up front, 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 home buying budget
If you haven’t already, start budgeting for the down payment and other costs associated with a home purchase, such as 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 get 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, estimated down payment and interest rate.
4. Be flexible
In a competitive market, it is almost impossible to find a property that meets all your needs AND fits within your budget. For example, a house may be in a great location, but it doesn’t have a big yard. Consider whether the trade-off is worth it.
“Focus on your ‘non-negotiables’ like location or travel 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 improvements, consider a fixer-upper, said Erin Sykes, founder of real estate company Sykes Properties. Older homes or those in need of renovation tend to have lower prices. “The houses that are less negotiable are the ones that are move-in ready,” Sykes said.
Being flexible on your closing date is another way to make your offer more attractive, Sykes said.
5. Get ahead of the competition
Many are waiting for mortgage rates to ease before committing to home ownership. While it may be tempting to hold off until you get the lowest possible rate, remember that home prices are expected to continue to rise. Once mortgage rates begin to fall, the pent-up demand for home purchases will lead to increased competition and even higher prices.
If it makes sense for your budget, buying a home sooner rather than later can give you more bargaining power.
“Consider buying now and refinancing later if rates fall, but don’t stretch to chase a slightly lower rate,” Smith said.
6. Consider building new homes
Limited resale inventory is directly related to high mortgage rates. Most current homeowners are unwilling to give up their mortgage rates below 6% (including many below 4%) to relocate, which is leading to a dearth of active existing home listings.
However, new construction may increase housing supply. In 2024, new home sales accounted for more than 30% of the single-family home market, compared to about 10% to 12% in previous years.
If supply is limited in your area, consider buying new construction, which can offer a more modest price and less hassle with bidding. As a way to entice buyers, many homebuilders have offered discounts and buy-in rates.
7. Interview multiple real estate agents
The right real estate agent can make a big difference in your home buying journey. You want someone with good communication skills, connections and experience, but the most important thing is an agent with deep 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 direct you to more affordable neighborhoods. 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 initial cost of home ownership continues to be a deterrent, 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 scores and down payment requirements than conventional loans. States also offer various 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 programs for first-time home buyers could save you money on your mortgage
9. Shop around for mortgage lenders
Regardless of what’s happening in the market, interest rates and mortgage fees vary widely between mortgage lenders, so you should always shop around. Experts recommend getting at least three loan appraisals 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 help you find one that matches your financial outlook 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 house, that’s okay. You can do a lot while waiting to put yourself in a better position when you are 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 close to 740. Paying off your credit cards on time (ideally, in full) and staying under your credit limit. Credit are great places to start.
Pay off the debt. Lenders also consider your debt-to-income ratio, or DTI. Paying off debt will lower your DTI, meaning you’ll be able to borrow more at a better rate. As an added bonus, it will also ease a huge financial burden and give you more room to save for long-term goals like a down payment.
Save for a down payment. It can take a long time to save enough money for a down payment, but you can start small with weekly or monthly savings goals. Consider keeping your money in a savings account or high-yield certificate of deposit (if you don’t plan to buy in the near future) to take advantage of compound interest.
Is it worth buying a house in 2025?
Experts are cautiously optimistic about the housing market in 2025, even though solving 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 for the investment to be worth it, now is a good time to buy,” Smith said. “Trying to wait for lower prices or interest rates can cost you in the long run because both are unpredictable.”
