Is right now a good time to buy a house? What to know about the current housing market

If you’re wondering whether it’s the right time to enter the housing market, you’re not alone. With global and economic upheaval swirling and mortgage rates stubbornly holding above 6%, you may be weighing whether to make the move now — or wait until conditions improve.

To make matters more confusing, the housing market is softening in ways that create both opportunities and challenges for aspiring homebuyers. Home prices are cooling in many metros, inventory is piling up and sellers may be more willing to negotiate. Yet elevated borrowing costs mean your purchasing power is more limited than in recent years, holding back first-time buyers.

Whether it’s the best time to buy a house really depends on your personal financial situation and financial readiness, as well as local market factors. Here’s what you need to know to make a more informed decision this summer homebuying season.

⭐ Must read: How to shop for a mortgage: A guide for smart homebuyers in 2025

At a glance: What to know about the current housing market

The 2025 housing market is presenting a mixed picture for prospective buyers. Here are the key conditions shaping today’s market.

📈 Mortgage rates remain elevated

The average interest rate on a 30-year fixed mortgage is 6.82% as of June 25, down 4 basis points from the week before. While the forecast for mortgage rates is clouded by policy uncertainty, many sources predict that the 30-year fixed rate may decrease slightly by the end of the year.

While these rates are higher than the historic lows of recent years, they remain below the historical average of around 7.8%.

🛒 Buyers are finally getting the upper hand in many metros

Recent Redfin data shows a clear shift toward buyers across the U.S. housing market. There are currently 34% more sellers than buyers nationwide — the largest imbalance on record since Redfin began tracking in 2013. This dramatic reversal has created buyer’s markets in 31 of the top 50 metros, where inventory is reaching historic highs.

🚀 Housing market fast facts

• The market is bifurcated, with 31 of the top 50 metro areas now favoring buyers and just 7 favoring sellers — primarily in the Northeast and Midwest.

• The condo market heavily favors buyers right now, with 83% more condo sellers than buyers, compared to just 28% more sellers than buyers in the single-family home market.

• Just 28% of homes sell above list price, down from 32% last year.

• The typical sale price is around $30,000 lower than the typical list price nationwide.

🏠 Home prices continue rising, but at a slower pace

The median home price in the U.S. reached $441,526 in May 2025, according to Redfin, up 0.8% year over year. However, Redfin economists predict home prices will actually decline 1% by the end of 2025, marking a stark reversal from years of consistent increases. This shift is driven by a significant imbalance in the market, where there are currently 500,000 more sellers than buyers — the largest gap since Redfin started tracking in 2013.

📉 Competition has eased significantly in many markets

Remember when buying a house felt like participating in the Hunger Games? Those days are largely over in most states. “At the macro level, we are still in a mild seller’s market,” Lawrence Yun, chief economist at the National Association of Realtors, said in a recent statement, “but with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals.”

What this means for you:

• More time to make decisions

• Ability to negotiate more favorable loan terms

• Less pressure to waive inspections

• Opportunities for seller concessions

🔍 Learn more: How the Federal Reserve affects mortgage rates (Hint: It may not be how you think)

Key factors to consider before buying

In today’s rapidly changing market, rushing into homeownership without proper preparation is a bad idea. With mortgage rates above 6% and economic uncertainty looming, readiness as a buyer has never been more crucial.

1. Get your financial house in order

In an environment where the difference of a single percentage point can mean hundreds of dollars more per month on your mortgage payment, your creditworthiness and down payment directly affect your buying power and how much house you can afford.

As an action plan for would-be homeowners, compare your finances with these key guidelines:

• Credit score. Aim for a credit score of least 680 (or 740+ for the best rates).

• Down payment. Save as much as possible, ideally over 20% to eliminate private mortgage insurance on a conventional loan.

• Debt-to-income ratio. Try to keep your DTI below 36%, and don’t close out old accounts or take out new credit before applying for a home loan.

🔍 Learn more: How healthy are your finances, really? 4 money questions to ask yourself today

2. Build a fortress-level emergency fund

Homeownership comes with unexpected costs that can derail your finances if you’re not prepared. In uncertain economic times, building a larger cash cushion isn’t just smart – it’s essential for protecting your investment and avoiding foreclosure.

Save up at least 6 to 12 months of regular expenses plus extra in a high-yield savings account for:

• Property taxes and insurance

• Maintenance and repairs

• Potential income changes

🔍 Learn more: Best high-yield savings accounts of 2025: AOL editor picks

3. Become a local market expert

While headlines might focus on national trends, real estate markets and homes for sale can vary dramatically even between neighboring ZIP codes. Understanding your specific area’s inventory levels, price trends and days on market will help you make smarter offers and avoid overpaying.

These research tools can be useful for staying on top of the market — and spotting genuine opportunities when they arise:

• Zillow and Redfin — track price trends, property taxes, inventory levels and days on market. The longer a house has been sitting, the greater your potential negotiating power.

• Niche — learn about local demographics and school districts and read reviews from locals

• Local government websites — check zoning changes, future development plans and property tax assessments

• WalkScore — evaluate walkability, transit access and nearby amenities

• SpotCrime — Review neighborhood safety trends and statistics

4. Think long term

Don’t try to time the market perfectly — instead, buy when it makes sense for you. Real estate is generally not a short-term investment, and transaction costs alone mean you need time to build equity and recover closing costs. If you’re planning to move again within a few years, renting might be the smarter financial choice.

Indicators you’re ready to buy:

• ✅ Your life situation — job, relationships and more — is stable

• ✅ You have a down payment saved — ideally 20% to avoid PMI

• ✅ You’re planning to stay put for at least 5 years

• ✅ You’ve planned for unexpected ownership costs

• ✅ You have a solid emergency fund

🔍 Learn more: 5 ways to build equity in your home more quickly (and why it matters)

5. Get preapproved (and not just prequalified)

In a market where sellers have options, a preapproval letter signals that you’re a serious buyer who can actually close the deal. Prequalification is just an estimate based on what you tell the lender, but preapproval involves actual verification of your income, assets and credit. This distinction can make the difference between having your offer accepted or not.

Why sellers take you more seriously:

• Shows you can likely follow through with financing

• Strengthens your negotiating position

• Clarifies your actual budget

🔍 Learn more: Mortgage prequalification vs. preapproval: Timing these two tools when shopping for a home

Benefits of buying a house in 2025

While current market conditions present challenges, there are clear advantages to homeownership for those who are financially and emotionally prepared.

Building equity vs. throwing money away

The rent vs. buy math is interesting, and it’s not as simple as comparing monthly payments. While early mortgage payments are mostly interest (and not equity), homeowners gain something renters don’t: protection from rent increases, tax benefits and potential wealth building through property appreciation.

Tax benefits that can save you a bundle

Homeownership comes with tax advantages that can save thousands annually, effectively reducing your real cost of ownership. The key is understanding how to maximize these benefits through proper tax planning and record keeping.

Potential tax benefits for homeowners:

🔍 Learn more: Tax breaks after 50 you might not know about

Hedge against inflation

Real estate has historically served as a hedge against inflation. As the cost of living rises, home values tend to rise (but not always!), potentially helping preserve and grow your wealth over time. However, with house prices predicted to fall by 1% this year (and much more in many metros), be aware that buying in a declining market means it will take longer for you to build equity.

Potential inflation protection benefits:

• Property values typically rise with inflation over time

• Fixed-rate mortgages become “cheaper” over time

• Rental income potential increases with inflation

🔍 Learn more: How to recession-proof your home right now: Expert tips for homeowners

Stability and greater control

Homeownership provides stability that renting cannot match. This stability is particularly valuable for families with children or those planning to stay in an area long term. You’re generally free to make all the improvements you want including painting, renovating and landscaping (as long as there’s no HOA to restrict you).

However, you can’t always control your job situation and neighbors, and buying a home makes your living circumstances that much more permanent and harder to change if you need to act quickly, so be sure to factor that into your equation before buying.

🔍 Learn more: Renting vs. buying a home: How to weigh what’s right for you

Income potential

Owning a home opens possibilities for generating additional income streams that can help offset your housing costs. These opportunities become particularly valuable during economic uncertainty, providing multiple ways to monetize your property investment.

Income opportunities include:

• House hacking — renting out rooms to offset mortgage costs

• Short-term rentals — becoming host on Airbnb, VRBO or other rental platforms to earn extra income

• Future investment — keeping your home as rental property or tapping your equity to invest in another house

• Home-based business — using your space for consulting, tutoring or other income-generating ventures (just make sure you have proper business insurance)

🔍 Learn more: How to shop for homeowners insurance: A step-by-step guide

Drawbacks of buying a house right now

While homeownership undoubtedly has benefits for many, the current market presents some significant challenges beyond high borrowing costs.

1. High mortgage rates reduce buying power

Today’s elevated mortgage rates have dramatically reduced what buyers can afford, forcing many to abandon their homeownership dreams. Higher rates don’t just increase monthly payments — rather, they fundamentally shrink the pool of homes within reach.

Consider a buyer who earns $60,000 a year:

• At 3% interest, they may qualify for a $281,779 home

• At 7% interest, they only qualify for a $197,119 home

• Result: $84,660 reduction in buying power

2. Affordability challenges persist

While certain Sun Belt markets are seeing much-needed relief from increased supply, areas in the Northeast and Midwest face severe affordability issues.

For instance, Newark, NJ is currently the strongest seller’s market, with 47.1% fewer sellers than buyers, helping Newark home sellers fetch record-high prices that place the metro’s median sale price at 12.2% higher than a year earlier.

Other seller’s markets include Nassau County, NY; Montgomery County, PA; and Cleveland, where tight inventory continues driving up prices.

3. Risk of market timing

Both waiting and buying now carry certain risks. Wait for lower rates? You might face higher prices from increased competition. Buy now? You risk overpaying if rates or prices fall later.

How to buy a home in an uncertain economy

Successfully buying a home in today’s challenging market requires a strategic approach. Here are six essential strategies to get started.

Strategy #1: Stick to your budget (religiously!)

For many homebuyers, this isn’t the time to stretch financially. With recession odds hovering at 40% right now, use conservative estimates for everything.

Budget reality check:

• Can you handle payments if your income drops?

• Do you have 6 to 12 months of expenses saved?

• Are you prepared for unexpected costs?

Strategy #2: Master the art of negotiation

For the first time in years, buyers have real leverage in many markets. The key is knowing how to use this power effectively and professionally to get the best deal possible without alienating sellers.

💡 Expert tip: Don’t be afraid to negotiate on multiple fronts simultaneously, especially if you’re in a buyer’s market and the seller is motivated.

🔍 Learn more: 6 ways to get the lowest rate on your next mortgage

Strategy #3: Lock in your rate (with options)

With mortgage rates continuing to fluctuate, protecting yourself from rate increases while maintaining flexibility for potential decreases can help provide greater peace of mind.

Rate lock essentials:

• Standard lock — 15 to 60 days of protection, usually for a fee

• Float-down option — lets you capture lower rates if they fall

• Extended locks — may be available for longer closings

🔍 Learn more: Mortgage rate locks: How they work — and why timing is everything

Strategy #4: Explore all financing options

Don’t assume conventional financing is your only or best option. Other popular loan programs can dramatically affect your down payment requirements, monthly costs and overall affordability — potentially opening doors you didn’t know existed.

🔍 Learn more: Can you qualify for homebuyer assistance? Possibly — even if you’ve already owned a home

Strategy #5: Shop mortgage lenders like your wallet depends on it

Rate differences can cost (or save) you tens of thousands of dollars over the life of your loan. The effort you put into lender shopping could be the most profitable hours you’ll ever spend.

Comparing the two lenders for a $400,000 mortgage less 20% down, you’d pay $107 a more each month by going with Lender B —and $38,682 more in total interest over the life of the 30-year loan.

💡 Expert tip: Get quotes from at least three different lender types, including traditional banks, credit unions, online lenders and mortgage brokers.

Strategy #6: Be ready to move fast

Even in a buyer’s market, preparation separates successful buyers from those who watch opportunities slip away. Having all your ducks in a row means you can act decisively when the perfect property appears.

Your preaction checklist:

• ✅ Financing preapproved

• ✅ Home criteria clearly defined

• ✅ Team assembled — real estate agent, lender and inspectors

The bottom line: While homeownership may continue to be out of reach for many Americans due to continued high rates and inflated home prices, qualified buyers may find improved opportunities ahead if they remain alert, flexible and ready to act.

Other stories in our homebuying series

FAQs: Buying a home in today’s economy

Learn more about buying a home with these commonly asked questions. And take a look at our growing library of personal finance guides that can help you earn money, save money and grow your wealth.

Will mortgage rates go down if the Fed cuts rates?

It depends on the type of mortgage. Fixed rate mortgages are not directly impacted by the Fed actions. However, for adjustable-rate mortgages (ARMs) or home equity lines of credit (HELOCs), rates may decrease after a Fed rate cut, though the change may not occur immediately — it typically happens at the next rate adjustment period. Learn more about how the Federal Reserve affects mortgage rates in our comprehensive guide.

How quickly do mortgage rates respond to Fed decisions?

The response varies by loan type. Fixed-rate mortgages may not respond immediately or proportionally because they’re primarily influenced by the 10-year Treasury yield rather than the Fed funds rate. On the other hand, ARM and HELOC rates are more closely correlated to the Fed’s actions and typically adjust within a month or two after a Fed rate change.

Can I get a loan if my only income is Social Security?

Yes, if you can meet your lender’s requirements. While some lenders may prefer to work with borrowers who are employed full time, they legally cannot discount income from pensions, retirement accounts, Social Security or other government benefits programs when considering your application, thanks to the Equal Credit Opportunity Act. Learn more in our guide to qualifying for a mortgage in retirement.

How much equity do I need to refinance my mortgage?

Many lenders want to see that you’ve built at least 20% equity in your home before considering you for refinancing for the best rates with no private mortgage insurance. If you have good to excellent credit, some lenders and even mortgage types — like FHA and VA loans — will allow you to refinance with less equity. Learn more in our guide to timing your mortgage refinance.

Sources

• Mortgage Rates Expected to Move Lower in 2025 and 2026, Fannie Mae. Accessed June 25, 2025.

• The U.S. Housing Market Has Nearly 500,000 More Sellers Than Buyers—the Most on Record, Redfin. Accessed June 25, 2025.

• Just 28% of Homes Are Selling Above Asking Price, The Lowest Springtime Level Since 2020, Redfin. Accessed June 25, 2025.

• US rental market, Zillow. Accessed June 25, 2025.

About the writer

Kat Aoki is a finance writer who’s written thousands of articles to empower people to better understand technology, fintech, banking, lending and investments. Her expertise has been featured on sites like Lifewire and Finder, with bylines at top technology brands in the U.S. and Australia. Kat strives to help consumers and business owners make informed decisions and choose the right financial products for their needs.

Article edited by Kelly Suzan Waggoner

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