Is Now a Good Time to Buy?

A home purchase is among the largest financial transactions you will make in your life, and is not a decision to be made lightly. But how do you know it’s the right time to buy? It depends.

Your financial situation will dictate how much home you can afford, your interest rate and your negotiating power. That said, there are economic signs you can follow to get a snapshot of how current market conditions are impacting home prices, mortgage rates and housing supply.

Freddie Mac releases monthly economic outlooks in which our economists offer analysis of the current housing market and expectations for the months to come. Based on these outlooks, we’ve collected all you need to know about current market conditions and how to best prepare yourself for homeownership.

Current Market Conditions

Home prices

Freddie’s Forecast: Due to continued demand, home prices are likely to increase modestly across the rest of 2024 and into 2025.

Why It’s Important: Home values tend to rise over time, which is why homebuying is considered a safe investment. It’s also one way to build wealth.

Homes prices have increased during 2024 due to a continued lack of housing supply along with existing homeowners’ unwillingness to sell, because their mortgage rates are lower than current market rates.

Looking ahead to 2025, Freddie Mac’s forecast looks optimistic for homebuyers. We predict that continued demand for homes will increase home prices nationally, but at a slower rate compared to previous years.

Mortgage Rates

Freddie’s Forecast: Mortgage rates are likely to decline steadily across 2025, primarily benefiting first-time homebuyers and those looking to refinance.

Why It’s Important: Lenders set your mortgage rate based on several factors, including current market rates. Small differences in rates can make a big difference in your payments, which is why it’s important to watch mortgage rates closely.

Mortgage rates declined by 110 basis points (or 1.10%) between May and October 2024, which was welcome news for some homebuyers and those looking to refinance. However, rates have increased since then, though they remain 40 basis points below the high seen in 2024. We expect rates to further decline in 2025, loosening the rate-lock effect that has kept many existing homeowners from putting their homes on the market.

Housing Supply

Freddie’s Forecast: Housing supply will remain an issue until more housing is built or mortgage rates decrease further.

Why It’s Important: Demand for housing is primarily driven by home prices and mortgage rates. But the reverse can be true, too: demand can also affect home prices. Typically, when more people are trying to buy homes than there are homes to buy, prices tend to rise.

In September 2024, the sales of existing homes reached the lowest level since October 2010 as higher mortgage rates have kept many homeowners from selling. The pace of new home sales, however, is now higher than the pre-pandemic average, as certain incentives have made these homes more attractive. Because fewer homes are being sold, the housing supply has increased: In August, the supply of existing homes hit its highest level since July 2019; in September, supply increased again.

However, the housing supply still remains low by historical standards and still reflects a seller’s market. Until more homes enter the market — whether newly built or put up for sale — a supply-demand imbalance remains.

Is Now a Good Time to Buy?

The Verdict: Yes, though the homebuying market may soon get more competitive.

What to Know: Many potential homebuyers are waiting on the sidelines until there is more clarity about economic policies and mortgage rates. In 2025, we expect lower mortgage rates, which may boost inventory and encourage first-time homebuyers who felt locked out when rates were higher to jump back into the market. However, even better positioned are those existing homeowners with high rates and high equity, who may be looking to refinance to lower their rate or fund home improvement projects.

Still, the overall housing supply remains an issue. Until rates decrease to the point where more current owners are incentivized to put their homes for sale, there may not be enough supply to meet demand.

How to Prepare for Homeownership

There are several steps you can take to make sure you are ready for successful and sustainable homeownership when the time is right for you.

1. Start by understanding how much home you can afford. To get a rough estimate, most lenders suggest you spend no more than 28% of your monthly income — before taxes — on your mortgage payment. You can also multiply your annual gross income — the income you earn before taxes and other deductions — by 2.5. Ultimately, what you can afford will vary based on current interest rates, your debt and your credit history.
2. Next, consider setting a savings goal for your eventual down payment. It’s a myth that lenders require you to put down 20% of the purchase price as a down payment. Some loan products require as little as 3% down. You should know, however, that the less money you put down the larger your monthly payment will be.
3. Finally, start to put together your homebuying team. Surrounding yourself with experienced, trusted professionals will help you make informed decisions and avoid common mistakes during the homebuying process. Teams are typically made up of a housing counselor, real estate agent and lender, and each plays a different role in helping you find a home.