Looks like this year is ending on a high note - and not the good kind of high note. The average rate on a 30-year fixed rate conventional loan rose again to 6.89% which is much higher than the 6.65% that we started this year at on January 2, 2024.

Last week was light on news and with everyone is gearing up to make the most of 2025 and homebuyers, this week's newsletter is going to talk about your 3 biggest questions! 

The 3 Biggest Questions for 2025

Is 2025 going to be a good year to buy?

The theme since 2023 has been buyer hesitancy in the face of higher interest rates. Most buyers are scared that even a minor price correction will occur, rates will fall dramatically (at any moment) and they'll have missed a huge opportunity.

However, what we've seen in 2023 is almost the exact opposite. Rates have remained stubbornly high and prices have gone up. Existing home sales reported in December showed that that median existing-home sales price rose 4.7% from the last year of $406,100, the 17th consecutive month of year-over-year price increases. Additionally, those that have been reading this newsletter for the last year have seen that rates aren't moving up or down quickly. In fact, they been modulating between 6-8% over the last 2 years.

As I've said many times, and will continue to say, real estate is hyper local. Markets like Palm Beach, Florida are still very much a sellers market whereas markets like Austin are a buyers market. Regardless of what type of market you live in, I believe 2025 is going to be a great time to buy (just as 2023 and 2024 were), but this is not investment advice and it's not my money! 

If you are planning on buying a home, make sure that you are 1) working with a skilled realtor who knows your neighborhood like the back of their hand and can tell you what the true value of the home should be (which is not the same as the list price), 2) get a thorough inspection done so you aren't buying a home with surprises and 3) stay in contact with me so I can help you budget properly - you NEVER want to be house rich and cash poor!

Is there room for the market to get worse?

Every investment, even a home, involves risk. No risk, no reward. No one can predict the future, but current trends suggest that the same home supply issues will persist throughout 2025 - especially in highly desired markets. Even where home supply issues don't exist (like Austin), we're seeing year over year home prices tick up and new listings tick down, suggesting that Austin is back on the upswing. 

Additionally, rates are predicted to head lower over the next 12 months, which will undoubtedly bring more buyers into the market. Just look at what happened in September, 1000 news articles came out about how rates were falling, now is the time to buy, buyer frenzy picked up and we saw transaction volume skyrocket. Yes, it was short lived, but imagine if rates fell farther and it lasted longer? We would have seen prices jump from demand.

When will rates fall to the low 5% range?

I wish I knew! No one (and I mean no one) would like to see rates fall more than me. Depending on who you ask, most analysts believe that rates will only fall to the low 6s by year end 2025 😭. Of course, I expect all of these people to be wrong. Trump administration is promising 3% rates by yesterday, which I don't believe, but I do think that the labor market and inflation data will push rates into the high 5s by year end 2025. 

Just remember, mortgage rates should not dictate whether or not you by a home. Always buy what you can afford at the time you can afford it. Don't overextend yourself. As long as you are buying a well-valued home that you can afford, you're making a great investment!