The U.S. housing market is experiencing notable transformations. With mortgage rates steadily decreasing, sellers adjusting their prices downwards, and an increase in active listings, potential buyers are left pondering whether 2025 is the right time to purchase a home.
Read more: The best mortgage lenders for low or no down payments
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According to the Realtor.com August 2025 Housing Market Trends Report, the real estate market is showing signs of becoming more balanced. With the supply of homes available for sale increasing for 22 consecutive months, the inventory has consistently exceeded 1 million active listings over the past four months.
In August alone, over 20% of listings had undergone price reductions, with the most significant declines observed in the South and the West regions. The median days on the market for homes has extended to 60 days, which is a week longer than recorded last year and remains above pre-pandemic averages for the second month running.
This increased duration of listings allows buyers a greater range of options. As homes remain on the market longer, many sellers are resorting to lowering prices to attract buyers.
Mortgage rates have recently decreased, hitting a low of 6.08% in late September 2024 and remaining below the 7% threshold, albeit the highest rate over the year has reached 7.04%. Although this may not be stellar news, current trends appear favorable.
The Federal Reserve’s decision to decrease short-term interest rates on September 17 has compounded the trend of declining mortgage rates, which began at the end of May.
Consider the following strategies for navigating today’s mortgage landscape:
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More than 50% of homebuyers only seek preapproval from one lender, which limits their negotiating power. According to Zillow, about 45% of first-time homebuyers who explore multiple lenders secure better deals.
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A larger down payment can lead to more favorable mortgage rates.
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Buyers might negotiate below-market rates through buydowns or special financing deals from sellers or builders.
Actionable Advice: Utilize a mortgage calculator to evaluate the monthly payment you can manage based on different home prices, down payments, credit scores, loan types, and interest rates.
Read further: How to secure the lowest mortgage rates
Home construction is on the rise, with 1.63 million new homes added to the inventory in 2024. Nonetheless, the country still faces a housing shortfall of 4.7 million units according to analyses by Zillow drawing upon Census data.
“Unfortunately, the demand for housing continues to outstrip supply. Recent construction has helped mitigate the deficit, but we have yet to see significant progress in closing this gap,” noted Orphe Divounguy, a senior economist at Zillow.
Additional Tip: If your preferred locations are beyond your budget, widen your search to nearby, more affordable areas.
Deep dive: How much house can I buy? Use the Yahoo Finance calculator.
New home sales observed an 8.2% decline in July compared to a year prior, according to the U.S. Census Bureau, although inventory of newly built homes saw a year-over-year hike of 7.3%.
Realtor.com forecasts 1.1 million new homes to be constructed this year, nearly a 14% increase from 2024, with a focus on smaller, more affordable options.
Recommendation: If you are considering a purchase now, think about opting for a new construction home, where you might choose some finishes or secure a better deal on unsold spec homes.
Ultimately, determining whether now is a good time for your personal home purchase involves more than market analysis. Home buying is a significant commitment intimately linked to your financial and personal circumstances.
Renting often allows more flexibility, with leases typically lasting six months to under two years. Conversely, buying entails long-term investment considerations, including down payments, closing costs, and various financial commitments.
Essential factors include job stability—will you need to relocate soon, or does your work permit flexibility? Is your income solid and dependable?
Your credit score is paramount in qualifying for a mortgage, so knowing it ahead of starting the application process is crucial.
For conventional loans, generally not supported by government entities, a minimum FICO Score of 620 is expected. FHA loans may allow scores as low as 580 with a 3.5% down payment, while VA loans have variable requirements depending on lending institutions.
It’s vital to remember that the higher your credit score, the more favorable loan terms you can secure—lower interest rates can save you substantial amounts over the long term.
As an example, the median credit score for new mortgages in Q2 2024 stood at 772, based on data from the New York Federal Reserve.
Learn more: Average mortgage rates by credit score
Lenders also look closely at your debt-to-income ratio (DTI) to assess your financial health.
Fannie Mae suggests that a maximum DTI of 36% of your stable monthly income is ideal, allowing for exceptions up to 50%; however, sidestepping borderline qualifications is advisable.
Creating a calculation for your DTI involves dividing your total monthly debt by your gross monthly income. Include all relevant debts such as rental payments, car loans, and other obligatory payments.
Having a financial cushion in savings can also reassure lenders about your capability to handle unexpected expenditures. A substantial portion should focus on the expected down payment, ideally aiming for a minimum of 3% for conventional loans or 20% to evade private mortgage insurance costs.
The median down payment noted by Realtor.com for Q4 2024 was 14.4%.
Explore further: What to know about buying a house before the end of 2025
Be diligent in your search for the best mortgage offers. Secure a written preapproval and then look for a home that fits your needs and budget. Insights from Zillow indicate that first-time homebuyers are more likely to engage with multiple lenders and real estate agents.
Discover more: The best mortgage lenders for first-time buyers
Historically, mortgage rates tend to dip during economic slowdowns; thus, a recession often heralds reduced rates. However, this may lead to increased buyer interest, potentially elevating property prices. Timing the market effectively is complicated, suggesting a focus on personal readiness rather than market mechanics.
Proponents of buying now posit that securing the right home might justify the purchase despite high rates, with the option to refinance later. But if rates don’t decrease significantly in the future, this could complicate decisions. Ultimately, purchasing should be predicated on comfort with the terms received during closing.
The decision to acquire a home today carries unique pros and cons. While mortgage rates are fairly elevated, inventory is expanding. The question of whether it’s a wise time to buy is less about market timing and more about personal financial readiness. Ensure you can manage not only the down payment but also the closing costs and ongoing mortgage payments. If your plans include residing in the home long enough to make the initial costs worthwhile, it might be an excellent opportunity.
Locking in a mortgage rate can influence your short-term strategy and generally lasts from 30 to 60 days, with some options extending to six months. Rather than stressing over this aspect, it’s best to feel confident about your Loan Estimate and begin your relocation preparations.
As time passes, homes typically become more affordable relative to your growing income and savings. Many homeowners report that while purchasing their initial property felt daunting, the financial pressure diminishes over time. Additionally, as home values rise, homeowners establish equity working in their favor.
Article edited by: Laura Grace Tarpley
