2025 Housing Market: How to Make Smart Buying Decisions Amid Rising Costs

By Carissa Kristoff
Realtor, Berkshire Hathaway HomeServices Select Properties

As we move into 2025, one thing is certain: the mortgage landscape remains challenging for many potential homebuyers. With mortgage rates projected to hover around 6.3% throughout the year, affordability will continue to be a key factor in the housing market. Coupled with the expectation that home prices will rise by 3.7%, navigating this market could feel daunting. However, as someone who has been deeply involved in residential real estate for nearly two decades, I’m here to help you understand what these projections mean for buyers and how you can make informed decisions moving forward.

A High Interest Rate Environment

The anticipated 6.3% average mortgage rate for 2025 signals that we are likely to continue in a high-interest-rate environment. For buyers, this means that monthly mortgage payments will be higher compared to previous years, especially when compared to the historically low rates we saw just a few years ago. Even slight increases in mortgage rates can significantly affect the affordability of a home. For example, on a $300,000 loan, a 6.3% rate could result in hundreds of dollars more in monthly payments compared to a 3% rate.

As a result, many buyers may find themselves adjusting their expectations—either looking at less expensive homes or reconsidering their location choices. In some cases, buyers may be waiting to see if rates come down before making a move, which has created a bit of a standstill in the market, especially among first-time buyers.

Home Prices on the Rise

In addition to mortgage rates, home prices are expected to rise by about 3.7% in 2025. While this is a more moderate increase compared to the double-digit jumps we saw in 2020 and 2021, it’s still enough to add significant costs for prospective buyers. This rise in home prices, paired with high mortgage rates, creates a double whammy that impacts affordability.

What does this mean for buyers? If you’re on the fence about purchasing, it’s important to keep in mind that waiting might not always be the best strategy. While mortgage rates may decrease at some point, it’s likely that home prices will continue their upward trajectory, meaning waiting could ultimately lead to higher costs in both home price and monthly mortgage payments.

The Impact on Affordability

With these combined factors—higher mortgage rates and rising home prices—affordability becomes more of a concern than ever. For many buyers, especially those purchasing for the first time, this can be a tough pill to swallow. However, there are still ways to make the most of your home-buying journey:

  1. Evaluate Your Budget: It’s more important than ever to have a clear picture of your financial situation. Consider how the higher mortgage payments might affect your budget and whether you’re comfortable with the monthly commitment.
  2. Explore Loan Options: There are various types of loans available, and some may offer better terms depending on your circumstances. For example, adjustable-rate mortgages (ARMs) can offer lower initial rates, but they come with the risk of higher payments later on. A seasoned mortgage broker can help you navigate the options that make sense for you. 
  3. Consider Your Long-Term Goals: Even though the market may feel tight, if you’re planning to stay in your home for several years, you might still benefit from purchasing now rather than waiting. Homeownership is a long-term investment, and property values generally rise over time. If you’re able to secure a home now, you may be in a better position in the coming years as the market adjusts. 
  4. Stay Flexible: In today’s market, flexibility can be your greatest asset. While you might not be able to get everything on your wish list, you can make adjustments in terms of location, home features, or even the type of property you’re purchasing. Sometimes, thinking outside the box can lead to finding a great home within your budget. 
  5. Work with a Real Estate Professional: As a real estate professional with over 19 years of experience, I’ve seen firsthand how much smoother the process can be when you have the right guidance. Working with an experienced agent who knows the market inside and out can help you secure the best deal possible—even in a challenging market.

Looking Ahead: The Bigger Picture

While the projected 6.3% mortgage rate and 3.7% increase in home prices may seem overwhelming, it’s important to view these trends in context. The housing market has proven to be resilient over time, and while 2025 may come with its own set of challenges, there are always opportunities. Buyers who approach the market strategically—armed with knowledge and a solid game plan—can still find success.

If you’re considering buying a home in 2025, now is the time to start preparing. Understanding your budget, being flexible in your home search, and working with an experienced real estate professional can help you navigate the landscape with confidence. As always, I’m here to guide you every step of the way.

Ready to start your home-buying journey? Let’s talk!

About Carissa Kristoff

With 19 years in residential real estate, Carissa Kristoff has built a reputation for providing clarity and confidence throughout every stage of buying, selling, or leasing a home. As part of the Berkshire Hathaway HomeServices Select Properties team, she collaborates with seasoned brokers, agents, and administrators to secure optimal outcomes for her clients. Carissa’s work ethic is matched by her commitment to enjoying life: she’s an avid sailor, snow skier, and certified yoga instructor. She also brings a hands-on approach to homeownership, thanks to her background running a residential cleaning and management company, where she honed her DIY skills in gardening, painting, and decorating. Whether guiding a first-time homebuyer or a seasoned investor, Carissa leverages her well-rounded experience to simplify the process and deliver top results.