Will Homes Finally Become Affordable in 2025?

The question on everyone’s mind is whether 2025 will bring relief to homebuyers struggling with

affordability. While recent fluctuations in mortgage rates have added uncertainty, many industry

experts predict a gradual decline in rates next year. However, don't expect rates to plummet too

quickly. The powers that be, believe a sudden drop could trigger a wave of buyer demand that

might erase inventory gains, potentially driving prices back up.

I am awaiting, hopefully, a drop to the 5.5% range so I can refinance my own mortgage. In 2023

I got caught in the rapid increase so I feel this one on a personal level. Overall, I think returning

mortgage rates to a "normal" range—around 4.5% to 5%—would benefit the housing market the

most. However, achieving those levels could still take some time, given the complexities of the

current economic climate.

Despite current challenges, there’s growing evidence that affordability is inching in the right

direction. The National Association of Realtors (NAR) recently reported a preliminary Housing

Affordability Index reading of 98.6 in August, up from 93.8 in July. While a reading below 100

indicates that the median-priced home is still unaffordable for the typical family earning a

median income, the upward trend suggests progress.

Additionally, Freddie Mac's latest Economic, Housing, and Mortgage Market Outlook shows that

starter home prices have risen faster than other segments. As a reference, the median sale

price for a home in Georgia as of June 2024 is $389,000, which can vary depending on the

location. Contrast this with May of 2019, when the median home value in Georgia was $188,500.

According to a recent article I read on Forbes Adviser, dated NOV. 7, 2024, Chief Economist

Hale stated “We’re noticing an increase in the number of homes hitting the market, particularly

in lower price ranges. Builders are also reducing the size of new homes to address affordability

issues, which could open up opportunities for first-time buyers.”

For prospective buyers, patience may be the name of the game. As mortgage rates potentially

settle and inventory continues to grow, the market could offer more accessible opportunities.

However, affordability gains will likely vary by city, home size, and other factors. Buyers should

stay informed and prepared to act quickly as the market evolves.

In the meantime, first-time buyers may find it worthwhile to explore smaller new construction

homes or areas with growing inventory in more affordable price points. As the market adjusts,

these factors could offer a clearer path to homeownership.

Whether 2025 becomes the year homes finally feel more affordable remains to be seen, but the

signs of progress provide hope for buyers seeking to make their move.

Recent Posts