Is now a good time to buy a house?
Buying a home is one of the biggest investments you can make, and today's housing market is tricky to navigate.
Take Sam and Tess as an example. The couple want to move from their city apartment to a quiet town closer to Sam's parents. They saved for a down payment on a home that will hopefully offer them more space and a growing source of equity. As they begin their home search, several market and economic developments may affect their strategy as well as their purchasing power. Here are some critical factors Sam, Tess and many new homebuyers will need to address as they navigate the 2025 real estate market.
Will mortgage rates go down in 2025?
Home mortgage rates in the US eased in 2024, with the Federal Reserve trimming 75 basis points off its borrowing rate late in the year. While some analysts are predicting more cuts ahead, it's still doubtful mortgage rates will decline dramatically during the second half of 2025.
Along with the widely followed federal funds rate, there are several factors that may prevent mortgage rates from declining. Depending on the type of mortgage you choose, your interest rate may follow a different benchmark. For example, fixed-rate mortgages follow the movement of the 10-year Treasury yield, while adjustable-rate mortgages, or ARMs, tend to follow the Secured Overnight Financing Rate.
Because neither benchmark consistently aligns with the federal funds rate, current mortgage rates may seem to defy the rate changes often reported in mainstream media outlets.
Will housing prices increase?
Many analysts expect home values to rise modestly during the remainder of 2025. Looking at the data from a national perspective, Fannie Mae's latest 2025 housing market forecast predicts a 4.1% increase in home prices.
However, this prediction could change if mortgage rates decline further. Lower rates typically attract more buyers, which could increase demand and push home prices higher than expected. Recent global tariffs may also drive up prices due to increased construction and material costs. Home pricing trends can also vary widely depending on the location. Partnering with a local real estate agent can help you better understand local housing prices.
Is it a good time to buy a house?
Many prospective homebuyers are wondering whether they should buy a house this year or wait for mortgage rates and inventory to improve. Looking beyond today's pricing and availability fluctuations, homeownership offers long-term benefits that are worth considering.
In addition to providing a place you can make your own, homeownership can offer you:
- A potentially growing source of equity
- An alternative to increasing rent costs
- Potential tax benefits
Additionally, the average US homeowner moves every 5 to 7 years, so it's likely that the mortgage rate you receive today won't be the rate you pay for the next 30 years.
For those who are financially prepared, buying a home now can make sense. Here are six strategies to help you move forward.
1Check your local housing market forecast
While average housing prices declined slightly from early 2024 to early 2025, there were still variations across states and metropolitan regions. According to Redfin data, Austin's median home prices fell 4.6% from May 2024 to May 2025, while houses in the New York metro region were up 3.9%. It's also important to understand what's happening locally, so let your real estate agent help you identify trends in your area.
2Assess your budget
Take a close look at your income, debt and savings to make sure you can afford a monthly mortgage payment at today's rates. One popular guideline advises spending no more than 28% of your monthly gross income on your housing payment, which includes mortgage principal, interest, property taxes and insurance.
There are also several government-backed homebuyer assistance programs, such as Federal Housing Administration, Veterans Affairs and US Department of Agriculture loans available to qualified buyers. Your mortgage broker can work with you on the details and qualifications for these types of loans.
3Ensure you're prepared
Taking the time to financially prepare to buy a home is key, particularly in today's market. The better your credit history and the larger your down payment, the better your mortgage terms and monthly payment may be.
If your credit score needs improvement, it may be worth waiting a few months while you work to raise it so you'll be eligible for better loan rates and terms. You can do this by paying down credit card balances, requesting higher limits on existing credit lines and paying bills on time.
While a 20% down payment isn't required for many borrowers, it can lessen the impact of today's mortgage rates and help you avoid private mortgage insurance obligations. The less you need to finance, the less you'll pay toward interest each month—as well as over the life of your loan.
4Don't try to time the market
It can be tempting to wait for lower rates, but doing so may come at a cost. Lower rates may drive increased demand, which can lead to higher home prices.
"While buyers might save money with a lower rate, higher home prices can quickly offset these savings," says Robert Fong, Senior Director of Mortgage Capital Markets at First Citizens. Instead, he recommends that prospective buyers focus on what works best for their unique financial situation. "Trying to find the absolute best time to buy is difficult and can often lead to missed opportunities," he explains.
If you're financially prepared, there may be alternatives worth exploring—such as an ARM. "When rates are declining, an ARM can provide savings by adjusting the rate downward after an initial period with a fixed term," Fong explains. "An ARM can be great for the right buyer, but it's important to consult a mortgage professional who can walk you through the pros and cons."
A mortgage refinance may be another option to consider. "You can buy at today's rate and then refinance when mortgage rates drop," says Ken Cox, Group Vice President of Mortgage Sales and Operations at First Citizens. Refinancing can make sense if you can lower your mortgage rate by at least 1%. A 1% or greater rate reduction can offset refinancing expenses and translate to lower monthly payments, as well as less interest paid over the life of your loan.
5Prepare for real estate commission changes
In March 2024, the National Association of Realtors, or NAR, agreed to a settlement that changed how sellers and buyers handle commissions. Under NAR's new rules, sellers are no longer automatically responsible for paying the buyer agent's commission. However, buyers can still ask sellers to cover the expense as part of their concessions.
The rule change also gives buyers and sellers the ability to negotiate commissions with their real estate agent, which could potentially lower overall transaction costs. "What the rule does is bring clarity and transparency to the process so everyone has clear expectations about how much will be paid, who's receiving that payment and who's paying it," Cox explains.
6Expand your search
If single-family homes are out of your budget, consider expanding your search to include condominiums. Relative affordability is one of the most significant benefits of buying a condo, particularly in today's housing market.
For buyers willing to take on renovations, foreclosures may be another option worth considering. While buying a foreclosed home involves some level of risk, it's often competitively priced. As a result, these types of homes may offer an opportunity to build equity quickly.
The bottom line
Even in the best of times, the homebuying process has its complexities. But the long-term benefits of homeownership continue to be enticing. If you’re considering a home purchase like Sam and Tess, talk with a mortgage banker to understand your options. They can work with you to review your finances and help you find ways to achieve your goals.
Key takeaways
Buying a home may seem stressful—but it doesn’t have to be. We’re here to help you make your dream a reality.
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