2025 Mortgage Trends: What Home Buyers and Sellers Need to Know

2025 Mortgage Trends: What Home Buyers and Sellers Need to Know

This year, mortgage rates, inventory shifts, and economic policies are shaping opportunities and challenges for both home buyers and sellers. Here’s a breakdown of the key trends and actionable insights to help your clients navigate the market effectively.

1. Mortgage Rates Stabilizing in the Mid-to-High 6% Range

Mortgage rates have been a rollercoaster, but in 2025, experts predict the average 30-year fixed mortgage rate will hover between 6.5% and 7.0%. After peaking at 7.04% in January, rates have settled around 6.83% by mid-April, with forecasts suggesting a gradual decline to 6.5% by year-end. This stability, while higher than the sub-4% rates of the early 2020s, offers predictability for planning.

Impact on Buyers

• Affordability Challenges Persist: At 6.83%, a $357,000 home (Zillow’s typical home value) with a 20% down payment results in a monthly principal and interest payment of about $1,854. This is a significant jump from five years ago, when payments were nearly 89% lower. Buyers may need to adjust their expectations, targeting more affordable homes or leveraging first-time buyer programs with as little as 1% down.
• Opportunity to Act: With rates unlikely to drop significantly, waiting for a “perfect” rate could mean missing out. I encourage buyers to get pre-approved and lock in rates now, as volatility remains a risk.

Impact on Sellers

• Increased Buyer Hesitation: High rates continue to dampen demand, potentially lengthening listing times. Sellers you may need to price competitively or offer concessions, like rate buydowns, to attract buyers.
• Negotiation Power: In markets with rising inventory, buyers have more leverage. Sellers I can help you to highlight and improve your home’s value and strategize flexible terms to close deals.

Marilyn’s Tip: I educate my buyers on creative financing options, such as 2-1 buydowns, where sellers or builders lower the rate temporarily. For my sellers, I emphasize home prep/staging and pricing strategies to stand out in a competitive market.

2. Easing of the “Lock-In Effect” Boosts Inventory

The “lock-in effect,” where homeowners with sub-6% mortgage rates hesitate to sell, is starting to wane. In mid-2024, 84% of homeowners had rates below 6%, but this is projected to drop to 75% by the end of 2025 as more owners list their homes due to life changes or stabilized rates. Inventory is up 32% from last year, though still below pre-pandemic levels.

Impact on Buyers

• More Choices: Increased listings give buyers more options and negotiating power, especially in markets with slower sales. Look for homes with price reductions—over 17% of March listings had cuts, the highest for any March since 2016.
• Act Quickly: Despite inventory gains, desirable homes in high-demand areas can still move fast. Pre-approval and a clear budget are essential to compete.

Impact on Sellers

• More Competition: As more homes hit the market, sellers face increased competition. Pricing realistically and highlighting unique features are key to attracting buyers.
• Opportunity to Move: Sellers who are not locked into low rates may be more willing to relocate, creating a chain reaction of listings. This could benefit clients looking to upsize or downsize.

Marilyn’s Tip: I help my buyers use search tools to track price reductions and set alerts for new listings. For sellers and buyers, I provide a comparative market analysis. For my sellers, I urge setting a competitive price and I suggest minor and major upgrades to boost appeal.

3. Economic and Policy Uncertainty

Economic factors, including inflation and potential tariffs from the Trump administration, could keep mortgage rates elevated. Proposed tariffs on imports may increase construction costs, impacting new home affordability. Meanwhile, the Federal Reserve’s cautious approach to rate cuts—holding the federal funds rate at 4.25% to 4.5%—suggests borrowing costs won’t drop dramatically.

Impact on Buyers

• Higher Costs: Tariffs could raise home prices by increasing material costs, particularly for new construction. Buyers may need to focus on existing homes or explore down payment assistance programs to offset costs.
• Refinancing Strategy: Buyers purchasing now could refinance later if rates drop to the 5.5%–6.0% range by 2026, as some experts predict. This approach avoids waiting in a competitive market.

Impact on Sellers

• Market Sensitivity: Economic uncertainty may cause some buyers to pause, potentially softening demand. Sellers should be prepared for longer marketing periods and home prep to highlight home’s value is more important than ever.
• Policy Opportunities: If policies easing zoning or incentivizing construction pass, inventory could grow further, benefiting sellers in high-demand areas.

4. New Construction and Affordability Solutions

New home construction is expected to rise slightly in 2025, with builders offering incentives like rate buydowns to attract buyers. Meanwhile, first-time buyer programs and down payment assistance are gaining traction, helping bridge the affordability gap.

Impact on Buyers

• New Home Appeal: New homes are increasingly priced competitively with existing ones and often come with builder incentives. Buyers should explore these options, especially in growing regions.
• Assistance Programs: Programs allowing 1% down or covering closing costs can make homeownership more accessible. I connect my buyers with lenders I work with familiar with these options.

Impact on Sellers

• Competition from Builders: Sellers of existing homes may face pressure from new construction, especially if builders offer lower rates or upgrades. I suggest highlighting the unique charm of your home and your established neighborhood.
• Stable Prices: With new supply moderating price growth, sellers can expect steady appreciation (around 3% nationally), but not the rapid gains of prior years.

Marilyn’s Tip: I partner with local lenders to inform buyers about assistance programs and builder incentives. For my sellers, in the marketing I devise, I emphasize the emotional and practical benefits of their home to differentiate it from new builds.

5. Shift in Real Estate Commissions

Following the 2024 National Association of Realtors settlement, sellers and buyers more directly than ever negotiate who pays buyer’s realtor commission in each transaction, and buyers must sign agreements outlining agent compensation before viewing homes. These changes add complexity to negotiations.

Impact on Buyers

• Negotiation Opportunities: Buyers may negotiate who pays the agent’s commission, potentially lowering costs. However, they’ll need to budget for this expense if the seller opts out.
• Transparency: Signed agreements clarify costs upfront, helping buyers plan. I work with my clients to explain these changes and ensure they’re comfortable with the process.

Impact on Sellers

• Cost Savings: Sellers can save by not covering the buyer’s agent commission, but offering to pay it could make their home more attractive in a competitive market. The strategy here needs to be discussed thoroughly with me ahead of the listing going active. Many buyers cannot afford to pay their own agent commission and need seller to pay it. I recommend appealing to as many buyers as possible and remaining open to this term when presented in an offer.
• Strategic Decisions: I discuss with sellers whether covering the buyer’s agent fee could speed up the sale or attract more offers, especially in buyer-friendly markets.

Marilyn’s Tip: I educate both my buyers and sellers on the new commission rules to set clear expectations. For buyers, I clarify how agent fees fit into their budget. For sellers, I analyze local market trends to determine if covering the buyer’s agent fee is a smart move.

Final Thoughts

The 2025 housing market presents both challenges and opportunities. For buyers, stabilizing rates and growing inventory offer a chance to enter the market, especially with creative financing and assistance programs. For sellers, increased listings mean more competition, but strategic pricing and concessions can attract serious buyers. As your realtor, my expertise in navigating these trends—backed by local market knowledge and strong communication—will be invaluable.

I connect my clients with trusted lenders, I leverage market data to inform pricing, and educate my clients on financing and commission changes. I am your trusted guide, and I help buyers and sellers thrive in this dynamic market.

Sources: Forbes, Business Insider, Bankrate, Freddie Mac, Realtor.com, Fannie Mae