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Happy New Year! As we move into 2025, I wanted to share my insights on what the real estate market has in store for us this year. From mortgage rates to home prices and inventory trends, there’s a lot to discuss. Whether you’re buying, selling, or just curious, this blog post will break down the key factors shaping the housing market in 2025.
Mortgage Rates: What to Expect in 2025
One of the biggest questions on everyone’s mind is: What will mortgage rates look like in 2025? While many people assume the Federal Reserve directly controls mortgage rates, the truth is, it’s more about inflation expectations. Mortgage rates follow the 10-year Treasury bond, with a typical spread of around 2%. The pandemic caused volatility, pushing that spread above 3%, but as stability returns, it’s starting to narrow.
For 2025, the 30-year fixed mortgage rate is forecasted to average between 6% and 6.75%. It’s expected to start in the high sixes during the first quarter and gradually drop to the low sixes by the fourth quarter. While these rates are higher than pre-pandemic levels, it’s a noticeable improvement from the peaks we saw in 2022 and 2023. This stability should help reduce the hesitation that many buyers felt due to past volatility.
The Financial Health of Homeowners
The financial position of homeowners in the U.S. is incredibly strong. Homeowners have amassed a record $35 trillion in equity, far outweighing the $13.7 trillion in mortgage debt. Nearly 70% of homeowners have either paid off their mortgage or have at least 50% equity in their homes. As a result, mortgage delinquencies and foreclosures remain at historically low levels.
Even in tough situations, like job loss, today’s homeowners have options thanks to their equity. Unlike the 2008 crisis, we’re not seeing systemic stress in the housing market. However, many homeowners are reluctant to sell due to the lock-in effect—they’re holding on to their low mortgage rates, which average around 4.2%. This reluctance will continue to impact inventory levels and housing market dynamics.
Home Prices: What’s Next?
Over the past five years, home prices have skyrocketed by around 60% nationally, with the East Coast nearing 65%. While this has been great for homeowners, it’s priced many first-time and lower-income buyers out of the market. The good news? Home price appreciation is moderating. Year-over-year price increases are now in the single digits, providing a sense of stability.
However, don’t expect waiting for lower mortgage rates to save you money. If home prices continue to rise, even modestly, it may offset the benefits of a slightly lower rate. The best time to buy was always five years ago, but today’s market still offers opportunities.
Inventory & Home Sales: What’s Changing?
We’re still facing an inventory shortage, largely due to the lock-in effect and more than a decade of underbuilding following the Great Recession. While we’re seeing gradual improvements, we’re not quite back to pre-pandemic levels. The good news for 2025? Both new listings and home sales are expected to rise, with total home sales projected to hit 5 million, a 10% increase over 2024.
The market is slowly shifting toward balance, meaning fewer extreme seller conditions and more opportunities for buyers.
2025 Real Estate Market Summary
So, what does all this mean for 2025? The housing market will likely be characterized by modest growth, ongoing affordability challenges, and a gradual recovery in inventory. There won’t be dramatic shifts, but improvements will be seen over last year. This is good news for both buyers and sellers, as it suggests more opportunities across the board.
How Can I Help?
At the end of the day, the real estate market is driven by individual needs. Whether you’re buying or selling, my team and I are here to help you navigate the 2025 market. We’re committed to staying informed and adapting to the challenges ahead to help you reach your real estate goals.
If you have any questions or would like more insights, feel free to reach out. I’m always here to provide expert advice and ensure you’re making the right decisions in this evolving market.
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Here’s to a successful year of selling—and happy New Year!
Let’s make your home the one buyers can’t wait to call their own!
