2025 Real Estate Trends: What Homebuyers and Sellers Need to Know
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What challenges do buyers face in the 2025 housing market?
So you want to buy a house this year or maybe sell the one you're in and trade up or downsize? We've got the episode for you. Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles.
And I'm Sarah Raffner.
With this episode, we continue our January series, Your Money in 2025. And today, Sarah, we are checking in on the housing market, specifically the house market. It's been a rocky couple of years for folks looking to buy their first house or move out of one and into another.
Yeah, buyers have been facing the headwinds of both high mortgage interest rates and high home prices. Lose-lose. The market is tight because people who bought before rates started to go up don't want to leave those rates. And just in general, more people want to buy houses than the number of houses that are actually available. So it's all been a little bit stuck.
For a little while last year, it looked like things were maybe going to loosen up as interest rates started to come down. But then that trend reversed itself for a bit. Who knows what's coming this year? We're going to try to look into the crystal ball and at the very least, give you some helpful tips for navigating the process and getting ready for when you do decide you want to jump into the market.
That's right. There are a lot of steps you can take now in anticipation of what you might want to do later in the year.
Well, we want to hear what you think. What are you working on in your financial life as we start the new year? Leave us a voicemail or text the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or email a voice memo to podcast at nerdwallet.com. Sarah, let's get into your conversation with our fellow nerd, Holden Lewis, and get a sense of what the housing market might look like in 2025.
Holden Lewis, so glad to have you with us again on Smart Money. It's great to be here. All right, Holden, let's start with an overview of last year and where we stand with the basics of the housing market as we begin 2025. I'd venture an educated guess that interest rates were the big story last year because they influence mortgage rates, so many other kinds of loans. It doesn't really seem like there's been much relief price-wise in most housing markets. So what's the 10,000-foot view at the moment? Well, the 10,000-foot view is that home affordability, it really did take a hit in 2024. Home prices were higher than in 2023. Mortgage rates went up until May, then they went down from June to September, and then they went back up again You know, when you look at that, it's like there was a real hurdle in home affordability from April through July, which are the prime home buying season.
Home prices were higher and so were rates. That was kind of the main thing that happened. And then home prices fell in the fall and then rates started rising again. All of that took a big whack at affordability. Could you talk a little bit about the relationship between interest rates that are determined by the Federal Reserve and mortgage rates? Because last year, mortgage rates were slowly coming down for a good part of the year, as you said. And then the Fed started to bring overall interest rates down and then mortgages ticked back up. So walk us through what happened there and what potential homebuyers should be paying attention to this year. The Fed sets the rate for an overnight loan among banks. Look, a one night loan, it doesn't really have much of a relationship with a 30 year mortgage, which lasts 11,000 nights. Mortgage rates respond to broader, longer term economic signals, especially concerning inflation. They tend to go up and down. I'm talking about mortgage rates.
They tend to go up and down with the 10-year Treasury yield. And those yields have been going up because markets believe that we might have a resurgence of inflation, especially if tariffs are increased during the Trump administration. So what are some of the primary factors that potential homebuyers are looking at and facing if they're hoping to either buy a house for the first time this year or sell one house to buy another?
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