After a decade of stability, the housing market became more volatile when inflation and mortgage rates started surging in 2022. Rising housing prices and mortgage rates have raised the cost of homeownership, preventing many first-time home buyers from entering the market.
Many would-be buyers have opted to continue renting while waiting for market conditions to improve.
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However, the housing market that existed five years ago may not be back any time soon.
Berkshire Hathaway Home Services highlights why it’s unlikely buyers will ever be able to time the housing market perfectly and how they should navigate the current conditions.
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Berkshire Hathaway explains that home buyers may need to adjust their market expectations for 2025
In 2020 and 2021, the housing market strongly favored buyers. Mortgage rates reached historical lows of under 3%, and sellers were eager to cut deals as COVID uncertainty loomed large.Â
However, mortgage rates skyrocketed from 3.5% to 7% by the end of 2022, and surging inflation contributed to higher home prices. Many buyers hoped this would be a short-lived market fluctuation, but Fannie Mae doesn’t expect mortgage rates to dip below 6.5% before 2027.Â
The housing market inventory is also unbalanced, falling short of the several million homes needed to match current demand levels. Housing prices will likely rise further, and buyers must consider that possibility when delaying homeownership.
More on homebuying:
- Dave Ramsey warns Americans on a homebuying mistake to avoid
- Housing expert reveals surprising ways to reduce your mortgage rate
- Americans buying homes may see major housing cost changes in 2025
- Finance veteran has a warning for Americans purchasing a home now
According to the Berkshire Hathaway Home Services blog, buyers in the ideal housing market will find the right home, purchase at the right price, and get the best mortgage rate.
However, the blog notes, “You may get lucky and get one out of three or even two out of three, but it’s nearly impossible to get all three at the same time unless the market is in a recession or depression. Only then will there be plenty of homes to choose from, low prices, and low mortgage interest rates.”
It’s unlikely to find the trifecta of competitive pricing, low mortgage rates, and abundant supply in this market, so taking the plunge when financially prepared can help buyers make choices independent of market conditions.
Refinancing your mortgage later can help get you the best of both worlds
Many homeowners refinance their mortgage to get lower rates, reduce their loan term, or change the type of loan.Â
According to the Federal Reserve Bank of New York, one-third of outstanding mortgages were refinanced between 2020 and 2021. And nearly 80% of home buyers would refinance their mortgage if rates began falling in the near future.
Related: JP Morgan unveils major 2025 housing market prediction
The Berkshire Hathaway Home Services blog highlights that finding a home within your budget should be the priority when house hunting.
“Start with finding the right home—one that best meets your household’s needs for space and features, your finances, and a reasonable interest rate.”Â
Refinancing your mortgage loan down the line allows buyers to focus on finding the right home for their needs and provides flexibility in a market with frequent fluctuations.
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