Patience and Flexibility Remain Key When Entering the Housing Market in 2025

If you found yourself on the sidelines of the housing market in recent years, you’re not alone.

Between elevated interest rates, bidding wars and soaring home values, many prospective homebuyers have been left wondering when some relief is on the way.

Trying to time your home purchase to coincide with rate drops can be difficult, so it is important to focus on what you can control, remain patient and flexible. Here are tips to help.

What Impacts Mortgage Interest Rates?

While the Federal Reserve has begun decreasing interest rates, mortgage rates are more influenced by the bond market, mortgage-backed securities and more specifically, the 10-year Treasury yields.

The 10-year Treasury yield is often used as a benchmark for mortgage rates, particularly the 30-year fixed mortgage rate. This is because both are long-term investments, and investors often compare the returns on these securities. Fixed mortgage rates tend to go in the same direction as Treasury yields, which have risen since the Fed’s first rate cut in mid-September.

If inflation stays in check and continues to subside along with any evidence of the labor market weakening, we could see mortgage rates begin to decline in the future.

Tips for First-Time Homebuyers

Affordability and availability are likely to remain challenging due to pent up demand, so it is important to have a plan in place so you’re ready when the time is right. Steps to prepare for purchase include:

• Understand Your Finances: Just like with any purchase, it is important to live within your means. A house will likely be the largest purchase in most consumers’ lifetimes. Ensure you have a clear picture on your financial situation and budget. Remember to factor your monthly payments, insurance, taxes, maintenance and other costs into your budget. Saving for a larger down payment can also help reduce your monthly payments and avoid the need for private mortgage insurance (PMI).
• Explore Financing Options: Federal Housing Administration (FHA) loans are just one option that can provide lower down payment and more flexible credit requirements than traditional loans but will also come with a mortgage insurance premium. Many lenders also have first-time homebuyer and affordable mortgage programs that can be paired with local, state and federal grants and mortgage programs that could be an option. Staying in close contact with your lender can help weigh your various options for different properties.
• Be Ready When the Time is Right: Ensure you get pre-qualified and pre-approved so you know how much house you can afford and how much you’re able to borrow so you can quickly get your offer in when you find the right home.

Tips for Existing Homeowners

Many consumers who already own their homes have “locked in” after refinancing during record low interest rates early in the pandemic. If you’re an existing homeowner looking to make a move in 2025, here are a few things to keep in mind:

• Define Your Timeline and Strategy: Know when you’re looking to make a move and when the market tends to be most active, particularly the Spring and Summer. As you prepare your home for sale, make sure you also weigh the return on investment (ROI) for any upgrades. Focus on high-ROI investments like modern bathrooms, improving curb appeal and some fresh coats of paint, among others.
• Upgrade Your Current Home Instead: If you love the neighborhood you’re already in and your home has space to grow or upgrade, opting for renovations could be an alternative that saves the hassle of a move. Many homeowners – particularly those locked in at low rates – have built greater equity in their homes in recent years. Using a home equity line of credit (HELOC) is just one option that can provide a low, variable rate with the option to borrow what you need when you need it. If mortgage rates decline below the rate you’re already paying, a cash-out refinance could be another option to fund your upgrades.

Wherever you find yourself in your homebuying journey, remember to remain patient, flexible, and financially disciplined so you’re ready when the time is right. If you need help defining your plan and strategy, schedule an appointment with your mortgage lender.