The 2025 Housing Outlook

Although 2024 had its challenges for real estate, homebuyers have a lot to be excited about (we’re looking at you, renters!) now that 2025 is in full swing. Below, we’ve got a rundown from Atlantic Bay and the mortgage market experts at MBS Highway on what we can expect this year.

The Interest Rate Outlook 

Although mortgage interest rates came down a bit at the end of 2024, the current average 30-year fixed rate remains a little above 7% (Mortgage News Daily) for a traditional conventional mortgage (and about a half-point lower for programs like FHA and VA). Experts believe rates should end up closer to 6% by the end of this year, but there are many factors we just don’t know; for example...

You’ve probably heard about “The Fed rate” in the news a lot. A lot, as the Federal Reserve (the central bank of the U.S.) has been trying to curb post-pandemic inflation.

Many people (even real estate pros) often mistake this rate for a “mortgage rate,” but it’s actually the fee U.S. banks charge to lend and receive money overnight. Currently, the Fed rate is hovering around 4.5%, and while that sounds awesome for a mortgage, that rate actually affects multiple consumer products like credit cards, auto loans, and yes, mortgages, but typically only in small increments over time. 

Expert Tip

Sure, 2025 has already begun, but it’s not too late to start 12 months of savings for your new home.

The Fed lowered its base rate in the last few months of 2024 but has since “slowed its roll,” with only two more cuts predicted for this year. But as we said, the Fed rate is not a mortgage rate. So, while it’s good to be informed about Fed decisions, you can stop your doomscrolling. The Fed’s input is only one piece of your home’s interest rate... 

...annnd that rate is just one piece of your mortgage. Your income, employment, savings, and down payment are also factors, not to mention larger market events like jobs and prices of goods. Focus on the factors you can control to get the right rate for you. 

Date the Rate, Marry the Home 

If you’re ready to buy now but are a little unsure, Barry Habib, CEO of MBS Highway, encourages homebuyers to remember the adage, “Date the rate, and marry the home.” In other words, “marry” a property that will bring you happiness and wealth for years, but “date” the rate by getting the best rate you can now. Then, “break up” with the rate by refinancing later.

Even if rates aren’t where you want them now, Habib believes the timing could actually be to your benefit. Higher rates mean less competition from other buyers, and during colder months, we tend to see home prices decline a bit, giving you a better deal. (And don’t forget about temporary buydowns and discount points)!

Plus – and this is important – many buyers forget about appreciation. Habib’s latest estimate for 2025 is 4.1%, so if you wait, you’ll likely need to borrow more money if you want to keep the same loan-to-value (LTV), the ratio of how much money you put down versus what you need to borrow. 

Then, when rates do come back down, demand will go up. The National Association of REALTORS® (NAR) estimates that for every 1% drop-in rates, there are 5 million more eligible buyers. Not all of them will buy, but those who do will create tighter inventory and move prices higher.

But if you buy now and rates come down later, that’s where refinancing comes in. Yes, you need to qualify again, and a refi comes with closing costs, but with a lower rate, you can ultimately recoup your money. For example, if you save $200 a month with your new mortgage, and your refi costs $4,000, your “break-even” point will be in 20 months, or less than two years.

Dating that rate doesn’t sound so bad now, right? Don’t forget that it never hurts to call Atlantic Bay and chat about your goals and get a “cost of waiting analysis” to determine your best time to buy. 

Inventory Update 

Nationwide, inventory is finally on the rise. National active listings are up 22% (between December 2023 and December 2024), which indicates that homebuyers have gained some ground in many parts of the country. Some areas, like Florida, Tennessee, and Texas are even showing signs of becoming “buyers’ markets” again. With luck, we’ll continue toward pre-pandemic levels.  

No More Medical Debt on Credit Reports 

Finally, some really great news to share is that the Consumer Financial Protection Bureau (CFPB) has finalized a rule barring medical debt’s inclusion on credit reports, potentially freeing up billions in credit for borrowers otherwise held back from homebuying due to high medical bills. 

Medical debt is the largest source of debt in collections, yet it’s not like other delinquencies because it’s often the result of unavoidable emergencies or billing errors. As of March 2022, the three largest credit bureaus (Transunion, Equifax, and Experian) announced they would no longer include paid medical debts, unpaid medical debts less than a year old, or medical debts under $500 in credit reporting. Now no medical debt of any kind will be an issue for deserving homebuyers! 

The rule will go into effect March 17, but if you’re ready to buy today, call Atlantic Bay to go ahead and start looking at your options!