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. Many prospective buyers are left wondering if now is a good time to buy a house.

If you're thinking of buying a home in 2025, there are several factors that may impact your decision—and your purchasing power. Here's what to expect from the housing market in 2025.

Understanding the real estate market

To better understand where the housing market may be headed in 2025, it's helpful to explore the forces that led to this point.

The real estate housing market has been challenging in recent years, particularly for first-time homebuyers. The pandemic upended the housing market, with buyers fiercely competing for a limited pool of homes. As mortgage rates dropped to historic lows of 3% or less, demand surged even further.

While many Americans benefited from these low rates, they set the stage for what economists are calling the lock-in effect. The Federal Reserve raised its benchmark rate 11 times between 2022 and 2023 in an effort to combat unusually high inflation. As a result, the average interest rate for a fixed-rate mortgage climbed to a peak of 7.79%—the highest level in more than 20 years—toward the end of 2023.

With so many homeowners locked in to unusually low rates, a large number became hesitant to sell. Fewer existing homes hitting the market led to further inventory declines, keeping both demand and prices high.

Thankfully, the 2024 housing market began showing limited signs of improvement. Mortgage rates declined slightly, home prices rose at a slower pace and the number of homes available increased slightly. Still, inventory remains tight by historical standards, meaning buyers continue to face strong competition.

"Low inventory has definitely impacted entry-level prices for new homebuyers," says Ken Cox, group vice president of mortgage sales and operations at First Citizens. "In the past, first-time homebuyers could find a home that was modestly priced. Now, we're seeing an increase in the entry-level price point for starter homes."

Housing market forecast for 2025

"Strong home values, limited inventory, new buyers entering the market and construction challenges may continue to influence the housing market in 2025," predicts Robert Fong, senior director of mortgage capital markets at First Citizens. "I think the market will remain highly competitive overall, but lower rates could help ease some of the stress for homebuyers."

Will mortgage rates go down in 2025?

Mortgage rates started to ease in 2024, with the Federal Reserve trimming a total of 75 basis points off its borrowing rate late in the year. While some analysts are predicting more cuts ahead, it's still doubtful that mortgage rates will decline dramatically in 2025.

"Those pandemic-era rates were the result of extreme government intervention to help stabilize the economy," Fong says. "Unless we hit a severe economic or global crisis, I don't think we're likely to see those kinds of rates anytime soon."

Instead, many expect rates to revert to historical averages. Fannie Mae predicts that average mortgage rates will decline but remain above 6%. While this is a relatively modest decline, it may be enough to improve affordability for buyers who've been priced out of the market.

Will housing prices increase?

Many analysts expect home values to rise modestly in 2025. Fannie Mae's latest 2025 housing market forecast anticipates a 3% increase in home prices, while the National Association of Realtors, or NAR, expects home prices to rise by just 2%.

However, these predictions could change if mortgage rates decline further. Lower rates typically attract more buyers, which could increase demand and push home prices higher than expected.

Is housing inventory expected to recover?

Inventory is expected to recover slowly in 2025. According to NAR, new housing construction in August 2024 was up 3.9% from the previous year, a modest gain that could help boost inventory. Plus, future rate cuts could provide an additional boost to supply.

"If rates continue to decline, we may see more buyers entering the market," Fong says. "This could push potential sellers who are currently sitting on the sidelines to list their homes."

Still, the pool of affordable homes is likely to remain limited, particularly for first-time homebuyers. "Inventory for starter homes will likely continue to be a challenge," Cox says.

Is now a good time to buy a house?

Many prospective homebuyers are wondering whether they should buy a house in 2025 or wait for mortgage rates and inventory to improve further.

While these factors may influence your decision, your personal finances and the condition of your local housing market should ultimately determine whether now is a good time for you to buy a home. "Buyers need to look beyond just interest rates and decide what's best for them," Fong says.

For those who are financially prepared, buying a home in 2025 can make sense. Here are six strategies to help you determine your next steps.

1Check your local housing market forecast

While average housing prices declined slightly from early 2023 to late 2024, there was still significant variation across states and metropolitan regions. For example, according to Redfin data, Tampa-area home prices fell 8% from April 2023 to April 2024 but houses in the New York metro region decreased more modestly, with only a 0.7% drop.

Analysts expect median home prices to rise modestly in 2025 across the nation, but it's important to understand what's happening locally. Your real estate agent can help you identify trends in your area.

2Assess your budget

Take a close look at your income, debts 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.

"Look carefully at your home budget, and work closely with your lender," Fong advises. "Resist the urge to overbuy because you want sustainable homeownership in the long run."

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 bigger your down payment, the better your mortgage terms—and monthly payment—may be.

According to Maggi Bryant, a mortgage banker at First Citizens, only borrowers with excellent credit—often those with FICO scores of 740 or higher—are eligible for the best interest rates and repayment terms for conventional loans. If your credit score needs some work, it may be worth waiting a few months while you work to raise it. You can do this by paying down credit card balances, requesting higher limits on existing credit lines and paying bills on time.

Likewise, while a 20% down payment isn't required for many borrowers, it can help lessen the impact of today's mortgage rates. The less you need to finance, the less you'll pay toward interest each month—and 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 on a lower rate, higher home prices can quickly offset these savings," Fong says. 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 adjustable-rate mortgage, or 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 all 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," Bryant explains.

5Prepare for real estate commission changes

In March 2024, 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 may still ask sellers to cover the expense as part of their concessions.

The new rules also give both 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 faster.

The bottom line

Even in the best of times, the homebuying process can be complex—and today's market presents many unique challenges. While housing market predictions for 2025 don't show drastic changes, buyers may see some relief.

If you're uncertain whether now is a good time for you to buy a home, speak with a mortgage banker. They can work with you to review your finances, assess your options and help you find ways to achieve your goals. "An experienced lender can help you find down payment assistance and other programs that may help your specific situation," Cox says.