Housing Market Update: What to Expect in 2025
The Cooling Housing Market: A Shift in Trends
Data from Realtor.com reveals that existing home sales have slowed down, with the typical home spending 62 days on the market in November 2024. This marks the slowest November for home sales in five years, a significant departure from the hot streak seen from 2021 to 2022.
Will Housing Prices Drop in 2025?
Experts predict that housing prices will not drop to pre-pandemic levels in 2025. While national house prices have stabilized and even trended downward compared to 2023 figures, the median sale price remains at $416,880. The median price per square foot has increased by 1.6%, indicating a complex market.
Why Are Home Prices So High?
Several factors contribute to the current housing inventory shortage. Homeowners are reluctant to give up their ultra-low-rate mortgages, and rising home prices combined with high mortgage rates make it costly for buyers to enter the market. Mortgage rates, although down from a year ago, remain stubbornly high, and economists don’t expect them to plummet anytime soon.
The Role of Interest Rates and Housing Supply
Experts agree that a combination of lower interest rates and increased housing supply is necessary for housing prices to drop meaningfully. The Federal Reserve’s conservative approach to lowering the federal funds rate may keep mortgage rates high. Meanwhile, current homeowners and home builders play a crucial role in driving housing supply.
Strategies for Eager Buyers
Despite the lack of hope for falling home values in 2025, buyers can still consider the following strategies:
- Buy with an eye on refinancing: Get into the market today and refinance down the line when rates come down.
- Start small: Purchase a condo or a tiny house to build equity and upgrade later.
- Go modular: Modular homes can cost 10% to 20% less than traditionally built homes.
Is 2025 a Good Time to Buy a House?
While interest rates may gradually decrease, the future of mortgage rates remains uncertain. It’s essential to consider your financial readiness, credit history, and employment track record before making a decision. The best time to buy a house is when you’re emotionally and financially prepared for homeownership.
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