Buying a home could get easier in 2025 – but not for first-time buyers

• The red-hot U.S. real estate market could cool slightly in 2025, which would make buying a home easier.
• Expect stable or declining mortgage rates and a larger housing inventory, according to Redfin.
• However, it is still prohibitively difficult for younger homebuyers to gain a foothold in the market.

The American dream of owning a home has become increasingly difficult to achieve in recent years. Real estate prices are high, mortgage interest rates are high, and housing supply is limited. Not to mention the growing threat of climate change, which is driving up housing costs like insurance, HOA fees and property taxes in high-risk states.

There is both good and bad news on the horizon for homebuyers, according to real estate market experts.

The good news? Overall, it will be easier to buy a home in 2025. But the bad news, at least for younger homebuyers, is that this largely only applies to boomers. For first-time buyers, particularly Generation Z and Millennials, homeownership is actually more distant than ever.

3 reasons why it will be easier to buy a home in 2025

First, property prices are expected to rise more slowly than in previous years. Redfin economists Daryl Fairweather and Chen Zhao predict that average U.S. home sales prices will rise 4% in 2025. Goldman Sachs has a similar outlook for 2025, predicting U.S. home prices will rise 4.4%. This roughly corresponds to average wage growth. Considering that U.S. home prices increased by over 40% between March 2020 and January 2024, this optimistic forecast is good news for potential home buyers.

Another obstacle to purchasing home ownership is the high mortgage interest rates, which have more than doubled in recent years. The average 30-year fixed mortgage rate has risen from under 3% in 2021 to around 7%.

While a 7% interest rate is still high by historical standards, it is a sign of improvement from this real estate cycle’s peak of 7.8% in October 2023. And rates could fall even further in 2025, according to real estate market experts. Redfin expects mortgage rates to stay the same or decline next year. Realtor.com predicts mortgage rates will be 6.2% at the end of 2025.

Finally, experts assume that new housing stock will come onto the market, which will lead to relief on the supply side. A Republican victory in Congress is a positive sign for homebuilders as the construction industry will benefit from fewer regulations, according to Redfin.

In October before the election, Jeffery Roach, chief economist at LPL Financial, said that an increase in housing starts, or construction of new housing units, was a signal that more single-family homes would come onto the market in the next few years. According to Realtor.com, new single-family home starts could reach 1.1 million in 2025, an increase of 13.8%.

All of these factors could improve the real estate market by 2025. Redfin predicts home sales will rise between 2% and 9% next year.

No houses for young homebuyers

But unfortunately, if you’re a first-time home buyer, you’re probably out of luck. Redfin doesn’t expect the increase in home sales to be driven by young or working-class buyers. It’s likely that any new housing stock that comes onto the market will go to older Americans first.

“Instead, affordable homes are being snapped up by older buyers who are priced out of higher price ranges,” Fairweather and Zhao wrote in a recent report.

In fact, first-time homebuyers are experiencing unprecedented difficulties in the real estate market. First-time buyers typically have a harder time buying a home because they don’t have the funds from the sale of a previous home to use for a down payment and mortgage payments, Redfin said in a June report, but today’s housing environment be particularly hostile to young buyers.

Wages simply haven’t kept up with the pace of house price increases over the past five years. According to Elijah de la Campa, a senior economist at Redfin, the cost of entry-level homes has risen twice as fast as incomes during this time. Additionally, for Generation Z and Millennials, student loans and credit card debt are proving to be barriers to homeownership because it is difficult to qualify for mortgages when credit is poor and debt is high.

As a result, the average age of first-time home buyers is now 38, an all-time high, according to the National Association of Realtors. That’s up from 35 in 2023. First-time home buyers are also making up a decreasing market share, at just 24% in the 12-month period ending June 2024. The year before, that share was 32%.

In comparison, boomers have an advantage in the real estate market. According to Edward Yardeni, president of financial research firm Yardeni Research, boomers own about half of the country’s net worth and home equity, giving them a head start in the real estate market. Now, as boomers age and look to downsize their homes or move elsewhere for retirement, they can benefit from the home equity they’ve accumulated through years of homeownership.

“Generation Zers, meanwhile, will be living with family or renting well into their 30s,” Fairweather and Zhao wrote.