LOS ANGELES — High mortgage rates and increasing home prices are sidelining many potential buyers, contributing to a prolonged sales slowdown in the U.S. housing market dating back to 2022.
Although home sales have started slowly this year, there are some favorable developments for prospective buyers. Recently, the average interest rate for a 30-year mortgage has eased slightly, hovering around 7%. Meanwhile, the availability of homes for sale has risen significantly compared to last year, creating a more buyer-friendly market than has been seen in recent years.
Despite these positive trends, many potential homebuyers, especially first-time purchasers without existing home equity, may find it challenging to capitalize on current conditions after years of rising home prices.
So, what does all this mean for the upcoming spring home-buying season?
Real estate brokerage eXp Realty’s CEO, Leo Pareja, recently shared his insights on the housing market, mortgage rates, and the increasing power of homebuyers in markets with abundant home listings, such as Florida and Texas. These insights have been gathered from an interview that’s been edited for length and clarity.
Q: How are U.S. home sales expected to fare this year?
A: In 2024, the market concluded with around 4 million resales and approximately 700,000 new construction properties. Moving forward into the new year, data from various sources suggests a rise in year-over-year figures from 2024 to 2025. We anticipate resales to reach between 4.2 million to 4.3 million, with new construction potentially rising to 750,000. Thus, our outlook is cautiously optimistic, informed by current economic data and early-year feedback from the field.
Q: Is this spring home-buying season expected to be more favorable compared to last year?
A: We are cautiously hopeful for a slight improvement over 2024 or 2023. Since 2021, there has been a persistent decline in activity, so our optimism is directed towards modest betterment.
Q: Does the increase in available homes for sale in regions like Texas and Florida suggest a buyers’ market?
A: That assessment seems reasonable. The interplay between supply and demand affects buying opportunities, envisaged here as a three-legged stool involving affordability, inventory availability, and finance options. With more inventory, there’s greater opportunity, though financing remains tough, as rates are unlikely to drop significantly.
Q: In these markets, should buyers expect sellers to be more willing to offer concessions, like contributing to closing costs or helping lower mortgage rates?
A: Indeed, builders are actively devising strategies to move inventory by being more flexible, often offering concessions that can cover a myriad of needs.
Q: What mortgage rate on a 30-year loan would stimulate a strong increase in home sales this year?
A: Ideally, rates in the low 5% range would invigorate both buyers and sellers. However, given current economic forecasts, a significant rate reduction still seems distant, potentially 18 to 24 months away. For 2025, we’re skeptical about rate improvements. As the situation stabilizes, those waiting for rates to dip to previous lows like 3% are now less likely to wait anymore.
