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The housing market has been on roller coasters for the past few years, but as rides slow to crawl, home prices and other measures could return to Earth. Here’s what you need to know about some of the most important aspects of the market:
House prices will be significantly slower
Prices rose during the pandemic as mortgage rates reached rock bottom and Americans reconsidered where they wanted to live.
Such a great benefit has resulted. Homeowners are sitting at a record level of home equity, but it’s becoming increasingly difficult for buyers, especially first-timers, to enter the market.
But now prices are back on Earth and may continue to do so. The Mortgage Bankers Association expects prices to rise only 1.3% in 2025, while Fannie Mae Economist predicts a price increase of 4.1%.
It is noteworthy that many analysts have predicted similar trends in the past, but we only see that the sharp imbalance between demand and available supply is increasing prices.
Has “Mortgage Rate Lock-in” finished?
What’s different now is that more homeowners seem ready to list their homes for sale. For the past few years, one of the most powerful forces to act in the housing market has been the “lock-in” effect of mortgage rates, which has led to rock bottom rate homeowners reluctant to move and undertake much higher borrowing costs.
As of the fourth quarter of 2024, the most recent data available was 72% of all outstanding mortgages under 6%, with over half of the rates below 4%. For many people, moving and underwriting a new mortgage at a typical rate of 6-7% has been difficult to contemplate unless absolutely necessary.
But now, anecdotal evidence shows that some of the unwillingness has been eased. Redfin real estate agent David Palmer sees it in Seattle, where he works. “There are so many people after the pandemic.
Selma Hepp, chief economist at real estate data company Cotality, says the thawing is happening much faster than most analysts expected. “Maybe it’s spring home view-in season,” she said.
Whatever the reason, buyers now have more options. Realtor.com data shows that there were 959,251 active lists in April, more than 30% higher than last April, and roughly the same level as the 2019 level. Some of them stayed in the market for a long time, so they increased 9.2% in April compared to March and 10.2% in March and February.
That is, after years of enthusiastic sellers’ markets, buyers may finally take a break, Palmer told USA Today. “I think this will be a good opportunity for people looking for a purchase. First-timers can actually negotiate something,” he said. It is also positive for those looking to trade up, as it makes it easier to compare options weights in slower-paced markets.
Is that a buyer’s market already?
It is too early to call this a buyer’s market. Experts like Hepp should note that in reality the national housing market is becoming increasingly local, with some regions experiencing different demands, while others are weaker.
Still, data from Realtor.com shows that more sellers are making price cuts. In April, 18% of the housing list cut prices. This is the highest share of April in Realtor.com data, dating back to at least 2016.
“This trend suggests that sellers are adjusting their expectations in the face of affordable challenges and weaker buyers’ demand in some markets,” the Realtor.com economist wrote in an April analysis.
Seattle agent Palmer says he’s used to talking to homeowners after being disappointed that he may have missed the market peak a few years ago. But many people understand reality, he said. “You’re happy to realize the reality of how expensive things are,” he said. “It’s a different world now.”