It’s 2025, and you’re finally ready to buy your first home. You’ve been saving, researching, and mentally decorating your dream kitchen for years. But is this the year to take the plunge? Let’s explore the details of the popular reports and forecasts as we are about to enter 2025.
What’s Going On With Mortgage Rates?
Mortgage rates are seen as the ever-present wild card in homebuying. They’re not as high as in the early ’80s when your parents paid double-digit interest (seriously, 18%?!), but they’re not the rock-bottom rates of a few years ago. Most experts predict rates in 2025 will hover around 6-6.5%. Not thrilling, but manageable.
Here’s why: the government’s been borrowing heavily, leaving less money for mortgages. Even optimists like Lawrence Yun from the National Association of Realtors say we’ll unlikely see rates drop below 5% unless significant budget cuts happen. And let’s be honest, when was the last time Washington agreed on anything?
So, what you should do is use an online mortgage calculator to find out what monthly payment you can afford. Play with different interest rates and down payments to see how they impact your budget. Knowledge is power.
The Inventory Issue: A Game of Musical Chairs
Here’s the kicker: There just aren’t enough houses. Depending on who you ask, the U.S. is short anywhere from 1.5 to 4.5 million homes. This shortage means competition for homes is fierce, especially in popular areas. Builders are working overtime, with a projected 1.1 million new homes expected in 2025. But it’s like trying to fill a bucket with a hole in the bottom—demand keeps outpacing supply.
What does this mean for you? Expect bidding wars in hot markets. But don’t lose hope; some areas are more affordable than others. Expanding your search radius could make all the difference
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Practical Example: You’re eyeing a trendy neighborhood where homes average $400,000. Look just 20 minutes outside that area, and you might find similar homes for $350,000. That’s $50,000 less to finance—or invest in your dream kitchen upgrade.
New Construction: A Silver Lining?
Builders are shifting gears, focusing on smaller, more affordable homes for first-time buyers. That’s great news if you’re okay with new construction. You might even pick finishes or score a deal on a move-in-ready home sitting too long.
New homes often come with fewer maintenance headaches. Some builders offer incentives like covering closing costs or lowering your mortgage rate. Don’t be afraid to negotiate.
Rising Prices: Ouch, But Manageable
Home prices are still climbing, thanks to low inventory. Expect a modest increase in 2025—think 3-5%. While that’s not great news, it’s slower than the double-digit growth we’ve seen in previous years. The key is to act strategically.
For example, use apps like Zillow or Redfin to track homes with price reductions. Have you found your dream home, but it’s out of budget? Wait for a price drop notification. When it comes, be ready to jump.
What About Property Managers?
You might wonder, “What do property managers do with me?” More than you think. If you’re not quite ready to buy, renting a managed property can be a brilliant stepping stone. As Jesse Sasomsup from Earnest Property Management says, they’ll ensure maintenance issues are handled, giving you the mental space to focus on saving for your down payment.
On the flip side, if you’re considering buying a duplex or small multi-family home, property managers can help you rent out the other units. This extra income could cover a chunk of your mortgage, making homeownership more affordable.
Final Thoughts
The 2025 housing market isn’t perfect, but it’s not a lost cause. You can navigate rising prices and tight inventory with research, flexibility, and strategy. And who knows? That dream kitchen might be closer than you think.
Ready to start your journey? Your first step is simple: get pre-approved for a mortgage. From there, it’s all about finding the right house at the right price. Good luck—you’ve got this!
