In some ways, now is a challenging time to take the plunge and buy your dream home. Many homeowners who locked in ultra-low mortgage rates a few years ago continue to stay put—limiting the supply of homes for sale—and it remains to be seen how the new presidential administration’s policy decisions will affect the housing market. But the general consensus among some of the country’s most respected housing economists is this: If you need to buy, then buy. And if you do decide to buy, make an informed decision.
“Trying to time the housing market is a fool’s errand,” says Joel Berner, a senior economist at Realtor.com. “The right time to move is the right time to move for you, as long as you can find a place that meets your budget and fulfills your needs.”
Some people have no choice but to move. Perhaps they have a new job and are relocating to a new city. Maybe they have a new baby and need more space, or they got divorced and need less. Others opt to move to improve their lifestyle—to be closer to work, for example, or to have a backyard for the kids to play in.
In early February, Nhu Vien Nguyen and her fiancé, Brian Timko, were on track to close on the purchase of a two-bedroom, two-bathroom condominium in Cambridge, Massachusetts, after “watching and waiting” for months for a unit to hit the market in a building they love. The commute is just 15 minutes to Timko’s job, and even though the couple are paying $845,000 for the unit and will be responsible for a monthly condo association fee of $693 in addition to their mortgage payment, the numbers work in their favor. Nguyen says she previously paid $3,900 a month in rent, plus a $110 pet fee for her dog, Kevin. Now, the couple’s mortgage payment and association fee total $5,079, saving Nguyen $1,470 a month on her $2,540 share of the monthly expenses.
The Fundamentals
Supply and demand are the primary drivers of the housing market. When supply—the inventory of homes available for sale—is down, prices tend to go up. Conversely, when there is a glut of inventory on the market, buyers have many choices, and sales prices often drop as sellers compete. Other factors that play into the outlook include the state of the job market, consumer sentiment, fiscal policy, interest rates, and inflation.
While most economists agree that the U.S. economy is strong, the housing market faces headwinds. Some buyers are hesitant to commit to a long-term mortgage when rates are hovering around the 7 percent mark, so they’re postponing a purchase in the hope that rates will drop later this year or next year. That reduces the demand for homes.
Those who either purchased or refinanced during the peak of the COVID-19 pandemic—back in 2020, when mortgage rates averaged 3.11 percent, or 2021, when they were 2.96 percent, according to LendingTree—are reluctant to sell and give up their low rates. According to Redfin, homeowners are staying in their homes nearly twice as long as they did in 2005, a trend that’s driven largely by older adults planning to age in place. And according to a Redfin survey released in January 2025, more than one-third of U.S. homeowners said they will never sell their home—further evidence of the constraints on the inventory of existing homes available for sale, and a factor that is likely to increase home prices further. Realtor.com forecasts that home sale prices will increase by 3.7 percent this year.
Despite the challenges, some positive signs are emerging. A Realtor.com monthly housing report released in January showed a promising change in seller activity, as the number of newly listed homes increased 37.5 percent month over month. And Morgan Franklin, a real estate agent with Coldwell Banker Realty in Boston, says that the buyers he represents are now putting in offers after being on the fence for months. “All of a sudden, people are starting to pull the trigger,” he says. “I think it’s because they are learning that they can’t wait for interest rates to come down.”
Realtor.com forecasts that the inventory of available homes for sale will grow both for existing homes (with an expected growth rate of 11.7 percent) and for newly built homes (expected to increase 13.8 percent) in 2025. That would help create the first balanced market in nine years, meaning that neither buyers nor sellers would have a competitive advantage, according to Realtor.com.
Interest Rate Outlook
Mortgage rates are a key factor that drive demand for housing. If buyers perceive rates to be too high, they’ll stay on the sidelines. But mortgage rates may never return to the levels buyers enjoyed in 2020 and 2021, experts say.“There is a lot of uncertainty in the debt markets right now, driven mostly by the potential for higher inflation from tariffs and tax cuts that could significantly increase the nation’s debt,” says Ken Johnson, a housing economist and the Christie Kirkland Walker chair of real estate at the University of Mississippi School of Business Administration. “That uncertainty should result in a bumpy road for mortgage rates in the next six months to a year, so my advice to home buyers is this: If you see a rate that you are happy with, you might want to lock it in now.” Depending on which new policies the Trump administration implements—tax cuts, blanket tariffs, or mass deportations—mortgages may trend well above 7 percent later in 2025, according to a LendingTree outlook.
Sam Khater, chief economist for Freddie Mac, notes that mortgage rates have averaged between 6 percent and 7.5 percent for most of the past two years. He predicts that the average rate for a 30-year, fixed-rate mortgage will drift down closer to 6.5 percent by the end of 2025. “That’s predicated on slower economic growth,” he says. “We expect inflation to moderate some, but not much. So I think there is some room for rates to come down, but I don’t think they’re going to drop to the low sixes—at least not this year.”
