It wasn’t too long ago that you could take out a mortgage with a less than 3% interest rate — the average 30-year fixed rate reached a record low of 2.65% in January 2021. While we’ve now settled into a mid-6% range — considerably lower than the recent peak rate of 7.79% in October 2023 — this could be about as low as rates will go in the near future.
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Realtor.com’s 2025 Housing Forecast predicts that the average mortgage rate will be 6.3% in 2025, reaching a low of 6.2% by the end of the year. Here’s what this means for buyers and sellers in the coming year.
Rates will be slightly lower in 2025 than in 2024 — an average of 6.3% versus 6.7% — but unfortunately, this likely won’t be enough for major cost savings for buyers. In fact, they may end up paying more.
“Mortgage rates are expected to decline, which boosts buyer purchasing power, but coupled with rising home prices, at least nationally speaking, homebuyers are looking at relatively similar monthly payments that are slightly higher compared to what they faced in 2024,” said Danielle Hale, chief economist at Realtor.com.
However, there are a couple of factors that may help buyers in the coming year.
“Income growth, which is expected to remain elevated, will help improve affordability prospects for homebuyers modestly in the year ahead,” Hale said. “While we don’t expect to see a huge gain in affordability, we do anticipate more negotiating power for buyers as inventory growth is likely to usher in the first year of a balanced housing market since 2016.”
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Although mortgage rates are not expected to drop dramatically, Hale believes they will drop enough to encourage more sellers to enter the real estate market.
“We expect to see an uptick in sellers that will push inventory up by 11.7%,” she said. “This will give us the biggest number of unsold homes since 2020, but we still won’t quite get back to 2020 inventory levels nationally in 2025.”
Hale predicts we will see a more balanced market in 2025 compared to recent years, which means sellers might need to be more patient and willing to negotiate.
“With a moderate uptick in the number of home sales in 2025, the market will shift, making it the first year of a balanced housing market since 2016,” she said. “This means that sellers will still be in a good position, but we may see more buyers aiming to negotiate on price and other contract terms than we’ve seen in recent years. It will also likely mean a slower pace to the housing market, so sellers will need to be prepared to be patient.”
