Buying a house before the end of 2025? What you need to know
Thinking about buying a house before the end of the year? Good news: The 2025 housing market is finally looking up after a rocky few years.Mortgage rates have eased from last year’s highs, and in many markets, buyers have more home choices. Housing prices are still high, but the breakneck rate of increases from years past has slowed. If your goal is to buy a home before the end of 2025, here’s what you need to know about rates, prices, and how to make the numbers work in your favor.
Mortgage rates in 2025: Down from recent highs
For many home buyers, mortgage rates are the biggest affordability factor. Thankfully, rates have eased somewhat in 2025 compared to previous years. According to Freddie Mac, 30-year fixed mortgage rates have been hovering in the mid-6% range — down from the 7.79% high in October of 2023.
Where mortgage rates go next is anyone’s guess, but here’s the backdrop. Mortgage rates tend to follow the 10-year Treasury yield, which has hovered in the 4.2% to 4.3% range lately.
If inflation cools or the economy slows, Treasury yields could slip lower, and mortgage rates might follow. If not, rates on both could bounce right back up.
That’s why the best advice isn’t to try timing the market to score a more favorable interest rate. Instead, shop aggressively. Get quotes from multiple mortgage lenders on the same day, and compare the annual percentage rate (APR) instead of just the advertised rate. Ask about programs like a rate float-down option, which lets you capture a lower rate if rates decrease after you lock in a rate.
To put the numbers in perspective: On a $350,000 mortgage, the difference between 6.5% and 7% is about $117 per month on a 30-year fixed-rate mortgage. That may not seem like a lot, but over a 30-year term, it adds up to more than $40,000 in interest. Locking in at the right moment could save you the cost of a new car.
Housing inventory in 2025: More choices
One of the main issues for buyers in the last few years? The lack of listings. In recent years, seller have stayed put because they didn’t want to give up their low mortgage rates and the affordable monthly payments that accompanied them — a phenomenon called the “rate lock effect.”
Today, that gridlock shows signs of easing.
The National Association of Realtors reported that existing home sales hit a seasonally-adjusted annual pace of 4.01 million in July 2025. More importantly, inventory climbed to 1.55 million homes — a 15.7% increase from July 2024. That works out to about 4.6 months’ supply, up from 4.0 months a year ago. More supply means buyers have a bit more leverage than they did even 12 months back.
Meanwhile, the new home market is practically brimming. Builders sold at an annual pace of 652,000 in July and had 499,000 homes for sale — equal to 9.2 months’ supply. That’s a deep backlog compared to the 7.5 months’ supply of July 2024, and builders are motivated to move homes. Translation: You’re more likely to see builder incentives like closing cost credits, interest rate buydowns, or even upgrades thrown in, giving you more bang for your buck at the closing table.
It’s a far cry from the days when buyers were waiving inspections just to win a bidding war. Now, buyers can take their time, negotiate repairs, or push for help with closing costs — especially if a property has been on the market for some time.
Home prices in 2025: High prices but cooled growth
If you’ve been holding off on buying until a housing market crash, you’ll probably have a long wait ahead. Prices haven’t fallen nationally, but the pace of growth is much slower.
The Federal Housing Finance Agency (FHFA) reported that annual home prices increased by 2.9% in the second quarter of 2025. Case-Shiller’s national housing price index was even softer, showing a 1.9% gain in June 2025. Both are a far cry from the rate of home price increases that frustrated buyers just a couple of years ago.
National numbers only tell part of the story, however. Buyers in some cities may encounter flat prices or slight dips, while those in other cities could experience bidding wars. The key is to look local. Your real estate agent can pull real estate comps and price trends for your preferred neighborhood, and those details matter more than any national index when it comes time for an appraisal.
For example, let’s say you’re looking at a $450,000 home in Phoenix. If comparable homes in that ZIP code are selling for $425,000, that’s your leverage. National data might indicate that prices are still rising, but a neighborhood snapshot will help determine if you can negotiate the list price down.
Rents are still on the rise in 2025
The rent line is worth watching for renters debating whether to keep renting or buy a home. According to the Bureau of Labor Statistics, both the rent of primary residence and something called “owners’ equivalent rent” rose 0.3% from June to July 2025.
That second term — owner’s equivalent rent — might sound like jargon, but it’s important. It’s the way government statisticians estimate what homeowners would have to pay if they rented their home. In other words, it’s a stand-in for the housing cost of the two-thirds of Americans who own rather than rent. Currently, the national owner’s equivalent rent is running about 4.1% higher than it was a year ago.
What does this mean for you? Simply put, shelter costs are still rising faster than overall inflation. If your landlord bumps your rent up every year, you’re feeling this number for sure. For would-be buyers, ever-increasing rents can make a fixed mortgage payment look appealing, even if today’s rates don’t feel like a steal, because it locks in a big part of your monthly budget.
Here’s an example: If you’re paying $1,500 a month in rent, a 4.1% increase adds about $60 to your monthly payment. Over one year, that’s $720 gone without building any wealth through home equity. Multiply that over several years, and the case for buying — even in a higher interest rate environment — could start to look stronger.
What this means if you’re buying in 2025
So, what do you need to do to buy a house in this market before you ring in the new year? A few considerations stand out.
1. Mortgage math matters more than ever.
Don’t just look at the interest rate on the page; look at what it costs to get there. Lenders often advertise mortgage rates with a hefty number of points built in. Mortgage discount points are optional fees you pay up front to reduce your interest rate. A payment of 1% of your total loan amount typically translates to a 0.25% reduction in interest rate.
Let’s say you apply for a $300,000 mortgage, and the lender advertises a 6.25% rate. You look a little closer and realize the 6.25% rate includes one discount point, meaning you’ll pay $3,000 extra at closing to get this rate. If you choose not to pay for a discount point, your rate will be 6.5% instead.
Whether paying for points is the right decision depends on how long you expect to stay in the house. If you’ll be in the house for decades, buying down the rate can be a worthwhile investment. However, if you might refinance or move in a few years, you may never break even.
2. Compare the benefits of buying a new vs. an existing home.
Builders have plenty of inventory right now, so you could see perks like design upgrades, rate buydowns, or closing cost credits. New construction homes also offer modern layouts and energy efficiency, but be aware of additional costs, such as HOA fees and lot premiums.
Existing homes may be less expensive and come with established infrastructure, such as parks and convenient access to shopping and schools. With more homes on the market, sellers may also be more receptive to price negotiations. The trade-off? Older homes could need updates or more maintenance, so factor those expenses into your budget as you weigh your options.
3. Budget beyond the mortgage.
When you consider your monthly mortgage payment, you might just think about the principal and interest. Several other factors make up your mortgage payment, though.
Homeowners insurance and property taxes will increase your monthly mortgage payment, and it’s important to get quotes early. Depending on various factors, you could also owe mortgage insurance. You may need to adjust your target home purchase price to ensure you can comfortably afford your monthly payment.
4. Don’t drain your savings just to hit 20% down.
You may be eligible to put down as little as 0% to 3.5% with specialty mortgages, such as VA loans and FHA loans. In many cases, you can even get a conventional loan with just 3% down.
The idealistic 20% down payment means you won’t have to pay for private mortgage insurance (PMI) with a conventional loan. However, it’s more important to have cash reserves left over each month for repairs or emergencies.
5. Timing your rate lock is everything.
If you plan to buy before the end of the year, locking in the right mortgage rate is crucial. Standard rate locks generally run for 30 to 60 days, which means buyers going under contract in October or November may want to explore an extended lock period.
Always check the cost of extending your rate lock. Some lenders offer attractive rates but tack on steep extension fees, especially for longer extension terms.
You can’t time the real estate market — there’s no guarantee that rates will increase or decrease from one day to the next. Locking in your rate at the right time is more about planning ahead so your rate lock term doesn’t expire before you’re ready to buy a house.
6. There’s zero shame in waiting to buy.
Of course, buying a house before the end of 2025 may not be the right call for everyone. If your budget feels stretched — even after seller concessions and rate buydowns — or if you’re unsure about your job stability, waiting could be the better move. Similarly, if your local market trends show an increasing number of listings and days on market per listing, you may very well find a better deal in 2026.
Another reason to press pause? If you’re planning a significant life change, like starting a family, changing your marital status, or switching jobs. In these cases, flexibility may be more valuable than locking into a mortgage right now. Rest assured, houses will still be there in the new year.
Buying a house before the end of 2025 FAQs
Is 2025 going to be a good year to buy a house?
It depends less on the calendar year and more on your personal finances. Rates have stayed under 7% for most of this year, inventory is improving, and price growth has cooled — all positives for buyers in 2025. But a “good” time to buy a house depends on whether you can comfortably afford the payment, have a stable income, and plan to stay put for a while. If you can check these boxes, 2025 offers opportunities that weren’t around a few years ago in the frenzied pandemic market.
Will houses become cheaper in 2025?
Nationally, a big price drop isn’t on the horizon. Data from FHFA and Case-Shiller show prices are still inching up, just at a slower pace than in past years. That said, some local markets are experiencing flat or slightly lower prices, particularly where inventory is building. If you’re house hunting, don’t count on a nationwide discount. Instead, focus on your area’s trends — days on market, number of listings, and seller concessions can matter more than national averages.
Should I buy a house now or wait for a recession?
Waiting for a recession to trigger lower mortgage rates or decrease home prices is risky because markets don’t always move the way buyers hope. Prices haven’t collapsed during past downturns, and mortgage rates can stay stubbornly high if inflation lingers. The safer bet is to buy when your finances and lifestyle are ready, not when headlines predict the “perfect” moment. If a recession does come, you can always refinance to capture a lower interest rate. But if the numbers work for you today, waiting may not bring a better deal.
