Is Now a Good Time to Buy a House?

Mortgage rates are important because they directly translate to monthly housing costs. The higher the rate, the more you pay every month. For example, let’s assume you make a 20% downpayment on a $380,000 house. Using this week’s 7.0% rate, your monthly payment would be $2,777 (including home insurance and taxes). This is just $28 shy of the all-time high. 

But, if we drop the mortgage rate to 6.0%, your monthly payment drops to $2,562. This is why, when rates fell to 6.4% back in August 2024, homebuyers gained nearly $30,000 over the lifetime of their mortgage. As of February 4th, daily average 30-year fixed mortgage rates sit at 7.1% – unchanged from last week. Rates remain high primarily because of inflation anxiety, tariffs, and a more negative 2025 roadmap from the Fed. 

>> Read: A Housing Market Under Donald Trump: What It Could Mean for Buyers, Sellers, and Renters

Supply: Limited, but rising

Months of supply sits at 3.5 months, where it was for most of 2024. Supply below 4 months tends to favor sellers; above 4 months often favors buyers.

Supply has slowly made a comeback from 2021, when it bottomed out at nearly one month – good news for buyers. However, that’s partly because more homes are sitting on the market unsold, not because building has rebounded. 

In fact, new construction has dropped in the past year because more inventory continues hitting the market. Builders have backed off since the pandemic-driven boom, with new housing starts down 3.1% in January. Investor activity has also plateaued and returned to pre-pandemic norms, helping supply stack up. Trump’s immigration plans, already underway, will likely hurt the building industry, too.

Demand: Slow but steady

Redfin’s Homebuyer Demand Index continues to lag behind November highs, but some buyers are accepting higher rates and starting their home search. This hasn’t translated to more sales, though. 

Other metrics are down, too, like new listings remaining flat and a falling share of sales going under contract within two weeks. Existing home sales also fell to their lowest level since 1995 last year, at 4.06 million, and we predict only a marginal improvement this year. Hardly any homes are changing hands. 

In general, there just aren’t enough homes on the market, which is driving up prices throughout the country. This means it may be a good time to buy, if you’re prepared for competition. Homes that are priced well and in good condition typically fly off the market. New homes have been selling more quickly than expected, too.

Inflation: An uncertain future

Thanks in part to the Fed cracking down hard on pandemic-related inflation, inflation has dropped to 2.9% – close to their 2% target benchmark. This is a major improvement from the meteoric post-pandemic inflation surge, which peaked at 9.1% in July 2022. Lower inflation means less spending on goods and services, which can help buyers’ budgets. 

However, recent economic data has the Fed concerned about inflation creeping back up. Plus, experts believe some of Trump’s policy proposals, namely Tariffs, would reignite inflation, so it’s unclear what lies ahead. Since February 2020, the cost of goods and services has risen 22.5%. 

Trump’s recently announced tariffs on Canada, Mexico, and China – America’s top three trading partners – will raise prices on everything from groceries, to aluminum cans, to oil changes.

>> Read: Inflation and House Prices: What Homebuyers, Sellers, and Renters Need to Know

Competition: Strong, but it depends on where you’re looking 

Recent surges in homebuyer activity means sellers could see more competition for their listings. 

House hunters scared off by high mortgage rates have been waiting on the sidelines for years, especially as inventory flagged due to sellers wanting to hold on to their pandemic-era rates (the lock-in effect). However, as 7% rates and near-record prices become the norm, more buyers are deciding to enter the market.

This trend varies by market, though. For example, in Texas and Florida, homes are sitting on the market for longer, while homes in Midwest and East Coast metros are selling faster.

>> Read: How to Sell Your House in 2025: A Comprehensive Guide

Personal considerations: Are you ready to buy and own a house?

When deciding whether to buy a home in today’s climate, you’ll want to think beyond market conditions and focus on your individual circumstances. Here are some personal considerations to keep in mind.

Financial health

Take stock of your current savings, credit score, and debt levels. Can you afford a house? Or does renting make more sense? 

Housing is a long-term commitment, so you’ll want a solid emergency fund for maintenance and unexpected costs.

Monthly budget

Determine how a mortgage payment at today’s rates might impact your lifestyle. Make sure you can comfortably handle monthly payments, property taxes, insurance, and other homeownership expenses.

Job and location stability

Buying a house makes sense if you plan to stay put for several years. A stable job or reliable income is crucial to avoid financial strain, especially if home prices or interest rates rise further.

Choosing your location is also essential. Is your potential home prone to flooding, wildfires, or other climate risks? This is especially important today, as insurers continue dropping homeowners at alarming rates. 

Personal goals and timelines

Think about life events, like starting a family, retiring, or relocating. These factors can make owning a home either more appealing or potentially riskier if you need to move soon.

Lifestyle preferences

Homeownership comes with ongoing responsibilities, like maintenance, repairs, and property taxes. Ask yourself if you have the time, resources, and a desire to handle them.

>> Read: Am I Ready to Buy a House? 8 Questions to Help You Decide

Will mortgage rates fall in 2025?

Barring unexpected economic changes, mortgage rates will likely remain above 7% through 2025. These rates could be the new normal for the foreseeable future.

Today’s mortgage rates reflect what investors think the Fed and new administration will do. Investors believe the Fed is done limiting inflation, and have already priced in Trump’s expected policy changes. Expectations are slightly clouded due to a few of Trump’s policy uncertainties, though.

Should you lock in your mortgage rate today? 

If you have the means, now is a great time to lock in a mortgage rate. Rates are lower than they were a year ago and are unlikely to fall significantly in 2025.

If you lock in your rate and rates suddenly fall, you have the option to refinance your mortgage too. 

All-cash buyers hoping to avoid mortgages altogether should also act now to avoid probable price hikes as competition heats up. We expect more home sales this year.

So, is now a good time to buy a house? 

If you have the means and are ready to own a home, now is a good time to buy a house. Waiting for rates to fall leaves you at risk of increased competition among buyers and subsequent price hikes from sellers. Rates are lower than they were a year ago and sales are still sluggish but improving, so now may be the time to act. Plus, rates are unlikely to fall substantially this year. 

It’s worth noting, though, that the market has been topsy-turvy recently due to historically low housing supply. For example, higher mortgage rates typically push house prices down, but they have had the opposite effect over the past two years. Also, declining inventory typically leads to more competition, but prices have been too high for many buyers to afford, causing some homes to sit unsold and others to sell in a few days. A new administration brings another layer of uncertainty, too. 

It’s important to be prepared for any surprises that may come.

>> Read: How to Buy a House: 10-Step Home-Buying Guide

Final thoughts

If you’re in the market for a house and have been scared off by high rates, now is the time to connect with an agent and start your home search. Rates will likely remain steady for the foreseeable future, but buyers are getting restless, helping the market gain momentum. The longer you wait, the more competition you’ll see.