Believe it or not, the housing market is improving for buyers. There are more homes for sale, more price discounts, and easing credit conditions. Considering all of the factors that exist in the 2025 housing market — is it a good time to buy a house?

Read more: The best mortgage lenders for low or no down payments

In this article:

Understanding the current housing market

Is it a good time to buy a house?

Your next move

FAQs

There is some good news, and we'll take it when we can. According to the Realtor.com June 2025 Housing Market Trends Report, there are some important signs that the real estate market is "normalizing. "

More homes are on the market. The supply of houses for sale has grown to a post-pandemic peak. For the second month in a row, active listings exceeded 1 million in June 2025.

In June, more than 20% of listings featured price reductions. That's the highest percentage of price cuts for any June since 2016. It's also the sixth month in a row of growing sale price reductions.

The median number of days homes were on the market rose to 53 days in June. That's five days longer than the same time last year. The longer listings remain active, the more choice buyers have. The increased time on the market is likely triggering those seller discounts we mentioned above too.

In the most recent report on credit supply, the Mortgage Bankers Association said that mortgage lending standards are loosening.

“Credit supply increased to its highest level since August 2022," said Joel Kan, MBA’s Deputy Chief Economist, as lenders offered a greater variety of mortgage loan types to support the spring home-buying season.

In the past 12 months, 30-year mortgage rates slipped to a low of 6.08% in late September but haven't met that low-water mark again. According to Freddie Mac, the highest rate over the same period has been 7.04%. While that may not seem like spectacular news, at least interest rates are staying below 7%.

The Federal Reserve kept short-term interest rates unchanged at its meeting on July 30 — in spite of President Trump's push for a rate cut and the threat to replace Fed Chairman Jerome Powell.

To navigate today's mortgage rates, consider:

More than half of home loan borrowers (56%) only get a preapproval from one lender. That reduces your bargaining power and limits the opportunity to find a better interest rate from a more business-hungry lender. Zillow research says that 45% of first-time home buyers who shop multiple mortgage lenders got a better rate.

Putting down a larger down payment can earn you a better mortgage rate.

Some buyers get below-market mortgage rates by negotiating a buydown or special financing from a seller or builder.

Take action: Use a mortgage calculator to determine the monthly payment you can afford. You can then learn the home price, down payment, credit score, type of home loan, and mortgage interest rate to meet your home-buying goal.

Read more: How to get the lowest mortgage rates

New home construction has grown, with 1.63 million homes added to the inventory in 2024. Even so, the U.S. housing shortage is at an all-time high of 4.7 million units, according to Zillow's analysis of Census data.

"The unfortunate fact is that we still don't have enough housing in this country for people who need it. Construction has helped prevent the housing deficit from ballooning, but it hasn't yet begun to close the gap," Orphe Divounguy, senior economist at Zillow, said in a release.

Take action: If the area you love is too pricey, consider expanding your search to more affordable areas close to your favorite neighborhood.

Dig deeper: How much house can I afford? Use the Yahoo Finance affordability calculator.

New home sales fell 6.6% in June, compared to the same period a year ago, according to the U.S. Census Bureau. However, year-over-year inventory of newly-built homes was up 8.5% in June.

Realtor.com expects 1.1 million new homes to be built this year. That's nearly a 14% increase over 2024 — with builders focusing on smaller, more affordable houses.

Take action: If you want to buy a house now, consider a new construction home. You may be able to choose some finishes or make an even better deal on a spec home that's been on the market for a while.

To answer the question of whether it's a good time to buy a house for you personally, you must look beyond broad market forces. Buying a home is more than considering macroeconomic factors. It's an important life decision based on your personal and financial situation.

When you rent, the decision to move is broken down into six months, or a year or two at a time, as your lease renews. But every dollar-related detail makes a home purchase a medium- to long-term investment. Buying a house includes various costs: the down payment, closing costs, and financing fees, moving expenses, property taxes, and perhaps selling the house you're in now.

Homeownership requires a long timeline. How you make a living, your friends, family, and even community amenities all come into play.

A primary consideration: your job. Will it require a location change anytime soon, or can you live where you please? Is your income steady and all but assured?

One of the significant factors that will qualify you for a home loan is your credit score. It's important to know it before applying for a mortgage.

For the most common loan, a conventional mortgage not backed by a government agency, you generally need a FICO Score of 620 or better.

FHA loans can allow a credit score as low as 580 with 3.5% down. VA loans issued to qualified military service members and veterans don't officially have a minimum credit score, though some lenders will require a FICO Score of 620.

Of course, minimum credit scores are the entry-level to qualifying; the higher your score, the better the loan terms you'll be offered. Most importantly, that can mean you'll pay a lower annual percentage rate over the life of the loan. You may also have more room to negotiate on fees.

As a benchmark to where you stand, the median credit score on a new mortgage in the second quarter of 2024 was 772, according to the New York Federal Reserve.

Learn more: The average mortgage rate by credit score

A primary financial metric lenders will use to determine your creditworthiness is your debt-to-income ratio.

Fannie Mae, a government-sponsored entity that provides liquidity to the home loan market, looks for a maximum total DTI ratio of 36% of "the borrower’s stable monthly income." Exceptions can allow for total DTIs up to 50%, but it's usually best to avoid working on the edges of qualification if you can.

You can calculate your DTI by dividing your total recurring monthly debt by your gross (before taxes and other deductions) monthly income.

Include debt such as monthly mortgage payments (or rent), real estate taxes, and homeowner's insurance. Also, add any car payments, student loans, and the monthly minimum due on credit cards. Remember any personal loan payments and child support or alimony.

Do not include debt such as monthly utilities — like electricity, water, garbage, or gas bills — or car insurance, television streaming subscriptions, or cell phone bills. You can also exclude health insurance costs and miscellaneous expenses such as groceries or entertainment.

Having a cash cushion in the form of emergency savings shows lenders that you are prepared for the unexpected. Of course, that savings account should also include …

A large chunk of your savings account should be dedicated to the down payment. A minimum of 3% down is required in order to qualify for a conventional loan targeted to first-time home buyers — or ideally, 20% to avoid private mortgage insurance. Yes, zero-down options exist if you are eligible for a VA- or USDA-backed loan.

According to Realtor.com, the median down payment in the fourth quarter of 2024 was 14.4%.

Dig deeper: Buying a house before the end of 2025? Here's what you should know.

Buy smart and shop a lot. Relentlessly shop interest rates and mortgage lenders for the best loan offers and justified fees. Get a written preapproval from your lender, then shop for a house you can love and can afford. Your home buying competition is.

According to Zillow, when it comes to first-time buyers versus repeat buyers, first-timers are more likely to reach out to at least three lenders and three real estate agents.

Learn more: The best mortgage lenders for first-time home buyers

Mortgage rates tend to fall during economic downturns, so a recession would definitely qualify as a time when rates would likely drop. However, lower rates generally increase demand as more buyers enter the market, so house prices would likely rise. Buying a house at a time when both mortgage rates and home prices are favorable is a challenge. You probably shouldn’t try to time the housing market by waiting for a recession. Buy when it makes sense for you personally.

"Buy now" advocates might say that if you find the right house at the right price — and you're financially set — you should purchase the home now and look to refinance later. But what if mortgage rates don't drop substantially enough to justify a refinance in a few years? Only buy a house when you are comfortable with the terms you can get on closing day.

There are pros and cons to buying in today's housing market. For example, mortgage rates are still relatively high, but inventory is improving. Deciding whether it's a "smart" time to buy a house is less about timing the real estate market and more about evaluating your financial situation. Can you comfortably afford the down payment, closing costs, and monthly mortgage payment? Do you expect to stay in the home long enough to offset the money you pay up front? Then it could be a smart time for you to buy a home.

Locking in a mortgage rate is a short-term decision, generally lasting only 30 to 60 days — sometimes up to six months. There's little reason to agonize over it. Be comfortable with the rate on your Loan Estimate and start packing boxes.

Homes become more affordable as your income and savings grow. Ask any homeowner: Buying that first house was a stretch. The monthly payment loomed large. As months and years go by, it becomes less of an issue. Then, as home prices continue to rise, you're on the right side of the equation: The growing home equity builds your net worth.

Laura Grace Tarpley edited this article.

The median price of a home is now over $410,800 — over 10 times higher than housing prices 50 years ago. What’s behind this massive upswing, and why are house prices so high still today? Here’s what hopeful home buyers need to know.

Read more: The best low- and no-down-payment mortgage lenders

*At the time of publishing, the U.S. Census Bureau had only released data through the second quarter of 2025.

This graphic shows the steady rise of median home prices over the years and the dramatic jump beginning in 2020. Prices peaked in October 2022 and then fell sharply.

Today, home prices remain higher than those of the pre-pandemic days, though home price growth has shown signs of slowing down. In some cities, prices have even begun to decline. For example, in Austin, Texas, home prices fell almost 5% between July 2024 and July 2025 and decreased by over 9% compared to 2022.

Still, the median national home price remains above $400,000, and mortgage interest rates are much higher than those bargain-basement 3%-ish pandemic rates. So, for most consumers looking to buy their first home, it’s a less-than-optimal time.

Why have home prices soared past $400,000 in the last few decades? The ongoing rise in home prices can be pegged to two key factors, said Josh Hirt, senior U.S. economist at Vanguard: a lack of supply and what’s called the “rate lock effect.”

There’s no two ways about it: America has a supply issue regarding affordable homes. By “affordable,” we’re talking about entry-level homes designed for the first-time home buyer.

“These are people starting their careers, getting married, wanting to start a family,” said Hirt. Generally, these buyers would gravitate toward homes sold by those looking to upsize. As previous first-time buyers move up, the supply of starter homes opens up. But today, Hirt said, that’s not happening for a couple of reasons.

First, there’s a longstanding lag in homebuilding. “There was a notable slowdown in housing starts in the wake of the financial crisis of the early 2000s,” Hirt said. During this period, the market was flooded with foreclosure properties, and supply far outpaced demand. In reaction, builders were reluctant to forge ahead with new construction projects catering to first-time buyers. “Now, we really need those homes, and they’re not there,” said Hirt.

So, that’s the first part of the reason home prices remain high: There are more buyers in the market than available properties — especially low-to-moderate-income buyers. This creates a seller’s market, which tends to keep prices high. Sometimes, it creates bidding wars where homes sell for over market value.

Dig deeper: When will the housing market crash again?

Higher mortgage rates are also a driving factor. As Hirt put it, “If you have a mortgage in the 3% range, there’s little incentive for you to trade up or out of that home when mortgage rates today are more than double that.”

He’s not wrong. As of Q4 2024, 82% of mortgaged homeowners had a rate of 6% or lower. A whopping 54% had rates of 4% or below. When you consider 2025’s rates, which have bounced between 6% and 7% all year, many homeowners would have to be hard-pressed to exchange those low rates for today’s significantly higher ones.

For reference, trading a 3% rate for a 6% one on a $300,000 mortgage loan would add $534 to your monthly payment — and more than $6,400 per year.

“A lot of homeowners who would be selling their homes just aren’t doing that,” said Hirt. The cost is too high.

The news cycle has been tumultuous lately. In addition to the factors above putting upward pressure on home prices, additional geopolitical pressures have now joined the conversation.

Reed Letson, a branch manager with Elevation Mortgage based in Colorado Springs, has been in the lending business long enough to see a wide range of economic pressures affect home prices. In the current market, he saw two rare influences affecting the prices of new homes: tariffs and a combination of labor and insurance climates.

“Tariffs are crushing builders,” Letson said in an interview via email. “Construction costs are projected to increase 4% to 6% from Canadian lumber tariffs alone.” At present, the tariff rate on Canadian lumber sits at 35% — a cost that U.S. builders can’t reasonably be expected to absorb.

As the National Association of Homebuilders (NAHB) succinctly put it, “In effect, the lumber tariffs act as a tax on American builders, home buyers and consumers.”

Letson added that builders and buyers are both racking up additional costs in the current economy. “The real killer is labor shortages have builders paying top dollar just to get projects done, while skyrocketing insurance costs in disaster-prone areas are making buyers' monthly payments look like car notes for a Bentley,” said Letson.

Current immigration policy impacts labor shortages as ramped-up deportation efforts could have an outsized effect on the construction industry. Even back in 2022, research from the Center for Migration Studies estimated that 54% of foreign-born U.S. construction workers were undocumented.

If buyers can afford the price of a home for sale, they may have a rude awakening on the insurance side of things. The U.S. Treasury reports that buyers in the top 20% of disaster-prone ZIP codes pay an average of roughly $2,321 in premiums — rates 82% higher than those in lower-risk areas.

Even buyers willing to pay those sums face nonrenewal rates (meaning your insurance company refuses to renew your policy) that are 80% higher than those in low-risk areas. Some insurance companies are pulling out of high-risk markets completely.

“I don't think I've ever seen buyers getting squeezed from so many angles all at once,” Letson said.

Learn more: How much house can I afford? Use the Yahoo Finance home affordability calculator.

So, with low housing supply and current homeowners clinging to their existing sub-4% mortgages for dear life, what does that mean for hopeful home buyers moving forward? Surprisingly, there’s actually some room for optimism.

For one, housing inventory is improving. Data from Realtor.com shows that the total active inventory of homes for sale increased almost 25% between July 2024 and July 2025. Over 20% of July listings saw a price reduction.

Mortgage rates are also likely to decline before the end of the year. The Federal Reserve is expected to cut interest rates at its September meeting, which could trickle down to mortgage rates, spurring more listings from existing homeowners. While interest rates probably won’t nosedive, any level of decrease helps with home affordability.

All in all, most industry experts project that home price growth will continue to slow — or even fall slightly in some areas — over the next few years. Fannie Mae’s July Home Price Index predicts that annual home price growth will fall from 3.8% this quarter to just 1.1% by the end of next year. The Mortgage Bankers Association predicts the Federal Housing Finance Agency’s House Price Index will dip from the 2.9% annual increase in Q2 2025 to a mere 0.3% by the close of 2026.

Read more: The median home price by state

Are you not in a position to wait for home prices to slow down or decrease? “If you can’t afford the home you want at today’s prices, consider trading down,” Hirt says.

Consider a condo instead of a single-family home or a smaller home with fewer features. A fixer-upper could also be a way to get your foot in the door.

Owning something at today’s rates still lets you build equity, and you can refinance your mortgage later on if rates take a drop.

You can also explore ways to get a lower mortgage rate, which can reduce your costs as a home buyer and owner. Ask your lender about a mortgage rate buydown, or see if your seller will pay for one on your behalf as part of your closing negotiations. Improving your credit score and paying down debt can also help you land a lower rate and payment.

Learn more: How to buy down your mortgage interest rate

The main reason home prices are so high in the U.S. is the low inventory compared to the number of buyers. This is driven by two factors: chronic under-building by homebuilders in the wake of the financial crisis and a lack of incentive for existing homeowners to sell their homes. Many homeowners locked in super-low mortgage rates in 2020 and 2021 and don't want to sell their homes only to buy new ones at today’s much higher interest rates.

U.S. housing is unaffordable for many right now — especially first-time buyers looking for less expensive homes — due to supply issues and mortgage rates. There simply aren’t enough homes in lower price ranges due to a lack of new home construction in the wake of the early 2000s financial crisis. Mortgage rates also impact the month-to-month cost of homeownership, and rates in the 6.5% to 7% range can make affordable homes unaffordable for low-to-moderate-income buyers on a budget.

Today, it’s a seller’s market — where the number of buyers far outweighs the sellers. This allows sellers to command higher sales prices and gives buyers less opportunity to negotiate for price discounts and seller concessions at the closing table. However, the market is balancing out a little bit, so home prices aren’t skyrocketing like they were a few years ago.

That depends on what you consider “affordable.” Home price growth has been slowing recently, and in some areas, prices have even declined slightly. For home prices to really drop significantly, though, the market needs more inventory — both from new home construction and from existing homeowners selling their homes.

Laura Grace Tarpley edited this article.

A housing market crash happens when home values plummet due to a lack of demand for or an oversupply of homes. The factors leading to a housing market crash are varied, ranging from economic recessions, depressions, and job losses to high mortgage rates that make buying a home widely unaffordable.

A housing crash can have upsides for some home buyers, with lower prices making homes more affordable. For instance, during the last housing market crash in 2008, home prices dropped over 15% compared to 2007, according to the S&P/Case Shiller Home Price Indexes. For other buyers, however, a crash means losing built-up home equity and tighter finances that could lead to falling behind on mortgage payments.

What’s ahead for the housing market in 2025? Experts say there’s no crash in sight, and home prices and sales are expected to remain on a slightly upward swing.

Read more: How to recession-proof your house as a homeowner

In this article:

When will the housing market crash?

Housing market crashes: Supply and demand dynamics

Housing crisis lessons for today

Signs of a housing market crash

What a crash could mean for home buyers

What a crash could mean for sellers

How to prepare for a potential housing market crash

FAQs

In general, economists don’t foresee a housing market crash anytime in 2025. According to recent insights from JPMorgan, it’s predicted that supply won’t outpace the demand for homes.

Housing experts point out that home supply is gradually increasing — but the operative word is “gradually.” Supply would have to move much faster to contribute to a crash.

“Unless there is a significant surge in the rate of unemployment, which is currently not in the forecast, the housing market is expected to continue to rebound from 2023 lows,” said Selma Hepp, chief economist of real estate data analytics firm Cotality, in an email.

Current data backs that up, with the June 2025 jobs data from the U.S. Bureau of Labor and Statistics showing unemployment at 4.1% — virtually unchanged from June 2024.

Are home prices slumping? A little bit. In a recent report, Cotality reported that May’s year-over-year home prices cooled off by 5% from May 2024. However, plenty of states still experienced price increases, especially in the Midwest.

Zillow’s July 2025 Home Value and Home Sales Forecast predicts national home prices will decrease overall in 2025, ending the year 2% lower than they began.

Hepp anticipated that home sales would likely increase due to lower mortgage interest rates and a rise in the number of existing homes on the market. Although mortgage rates probably won’t plummet this year, they should drop at least a little compared to 2024.

Learn more: Why are home prices so high?

For the housing market to crash, supply and demand must be drastically out of balance, favoring supply. Looking back at the first half of 2025, we can see that while supply is increasing, the discrepancy isn’t as drastic as it was in 2008. As of July 2025, the Federal Reserve Bank of St. Louis showed a housing supply of nearly 10 months.

“In a normal market balanced between buyers and sellers, we would have a six-month supply of homes,” said Rick Sharga, founder and CEO of CJ Patrick Co., a market intelligence firm for real estate and mortgage companies. For comparison, the buildup to the 2008 financial crisis led to a drastic oversupply — 13 months. That was more than double the average figure of six months and more than a ways to go from the current 9.8-month supply.

There’s also demand chipping away at the current market supply, likely driven in part by consumers taking advantage of declining mortgage rates. For instance, in late July 2025, the average rate for a 30-year fixed-rate mortgage was 6.74%. While these aren’t the rock-bottom rates seen in early 2021, those sub-3% mortgage rates are unlikely to return. Hence, buyers eager to buy are getting a foothold in the market where they can start building equity. If interest rates decline, owners can always refinance for additional savings.

Dive deeper: How historical mortgage rates compare to rates today

The housing crash that started in 2007 and contributed to the global financial crisis continues to weigh heavily on the minds of many economists and consumers. But the factors that led to that crash are not in place today.

“Literally everything is different about today’s housing market dynamics than the conditions that led to the housing crisis,” Sharga said. “That includes a limited supply of homes, high levels of home equity, economic strength, and the strict guidelines mortgage borrowers must meet.”

Mortgages today also look quite a bit different. Gone are the days of the low- to no-doc mortgage and zero-down for anyone and everyone. Today, lenders are looking for buyers willing to put skin in the game. The lowest down payments are typically with VA loans — which offer zero down — and FHA loans — offering down payments as low as 3.5%. Both loans still require stringent income, asset, and employment verification.

With those subprime lending products gone and most mortgage lenders requiring money down, today’s homeowners also have significantly more home equity than those from the early 2000s. Today, the average American has more than $300,000 in home equity.

Divounguy said that in 2007, homeowners who couldn’t afford their monthly payments typically had little home equity.

“When their home couldn’t sell, they couldn’t cut their asking price in order to sell their home,” Divounguy said. “As a result, many walked away from their homes.”

In contrast, today, people who sell have plenty of home equity and can afford to cut sale prices if they need to sell.

“Home equity is still near record highs in most housing markets,” Divounguy said. Most homeowners have extremely low monthly payments due to record-low pandemic mortgage rates. As a result, mortgage delinquency and distressed sales remain low.”

Learn more: 7 ways to build equity in your home

Whether you’re monitoring your home’s value or hoping to buy a new home, you may want to watch for indications of a future housing market crash. An economic shock such as a significant stock market crash or big, prolonged job cuts could signal the start of a housing market crash, Yun said, along with a large increase in the supply of homes.

If unemployment rose rapidly and homeowners couldn’t afford their mortgage payments, they could lose their homes to foreclosure if they couldn’t sell them, Hepp said. A large increase in foreclosures would bring home values down, leading to a potential housing crash.

“Currently, what may be a concern for some markets is the significant increase in non-mortgage related costs, such as property insurance and taxes,” Hepp said. “That may be a bigger concern for households with fixed incomes who may choose to sell their home if they can no longer afford to make their payments. If a significant number of properties were being listed as a result, that could dampen home prices and weaken a housing market. Nevertheless, with housing shortages still outweighing the impact of these additional expenses, a housing crash is not likely, especially a widespread one.”

Sharga suggested that consumers watch their local market conditions, such as whether the population and the job market is growing or declining, along with wages, home sales, and home prices.

“While a national housing crash remains very unlikely, every market is unique, and some are likely to see prices go down even as the national numbers are going up — probably not enough to designate it as a ‘crash,’ but enough to make a difference for some homeowners,” Sharga said.

Learn more: Which is more important, your home price or mortgage rate?

A housing crash is a mixed bag for home buyers. Crashes typically come with other economic undesirables, like job losses. Even if housing prices drop, many Americans could find it more difficult to qualify for a mortgage.

On the other hand, some home buyers could welcome a crash. Lower prices could mean those who have saved and are steadily employed have first dibs on more affordable housing. There’s also a small faction of buyers who think a housing crash of any kind. A December 2024 survey from LendingTree found that 36% of respondents wanted the market to crash for reasons ranging from market stability to lower property taxes. Of those, 8% of respondents feel a crash could help them buy a home.

Read more: Should you buy a house during a recession?

In a housing crash, homeowners who don’t need to sell may prefer to wait until home values regain their strength. Being “underwater” on your mortgage — owing more on your mortgage balance than the value of your home —- as many people were during the previous housing market crash doesn’t immediately impact your finances.

However, if you need to sell your house, you may need to consider more competitive pricing. Buyers in market crashes are looking for bargains, and you may end up with less profit on your home than you anticipated.

If you’re worried about when the housing market will crash again, you can take steps to protect your financial well-being.

Build an emergency fund. Experts recommend having three to six months of expenses in the bank.

Pay down your debt. Try to prioritize high-interest debt, like credit cards.

Buy within your budget. Whether the market crashes or not, it’s always wise to have a mortgage you can comfortably afford.

Make extra mortgage payments. Even a little bit extra each month can help you build equity in your home faster.

Choose a fixed-rate mortgage. Enjoy a steady mortgage payment, and don’t worry if rates increase — a fixed mortgage rate is locked in, regardless of what happens in the real estate market.

Are home prices going to drop in 2025?

Some economists anticipate a drop in home prices in 2025, though not enough to cause a housing market crash. Experts at Zillow forecast home prices to decrease by 2% in 2025.

Is 2025 a good year to buy a house?

The best time to buy a house is when buying makes sense for your unique financial circumstances. For some, that might mean buying a home in 2025 if their income, other debts, and employment support the mortgage payment required for the home they want. For others, 2025 could be the year to pay down debt and build up a down payment so that they qualify for a better mortgage rate in the future.

Is it possible for the housing market to crash again?

Yes, another housing market crash one day is a possibility. However, economists don’t expect a crash in the near future.

Laura Grace Tarpley edited this article.

Rather than asking, "When will mortgage rates go down?" many potential home buyers are now worrying that rates could move higher, perhaps beyond 7% — to 8% or more. What if you wait to buy a house only for mortgage rates to turn against you again?

Read more: The best mortgage lenders right now

The Federal Reserve's latest decision on July 30 to delay lowering interest rates pushed the rate cut calendar back again.

While the Fed doesn't control home loan rates, mortgage rates are closely interconnected with the bond market, which needs some kind of motivation to move lower.

However, imagine a scenario where the trade war suddenly goes off the rails. Tariffs upon tariffs cause consumer costs to skyrocket. Combined with rising international tensions, the price of oil soars. The stock market goes into a deep correction.

Now, add rising U.S. debt to the mix. Government spending continues to expand despite the pleas of fiscal conservatives.

"Is the 10-year [Treasury] and longer duration still the safe-haven, flight-to-quality, asset?” Goldman Sachs vice chairman Rob Kaplan said in a recent analysis. “In the last several months, it’s not quite acting that way."

If a sell-off begins, prices slide, and yields soar, the 10-year Treasury yield could jump from the current low-to-mid 4% range to 6% — or higher.

The result? Mortgage rates in the 8% range.

Dig deeper: How are mortgage rates determined? It’s complicated.

Chris Whalen is an investment banker in New York and chairman of Whalen Global Advisors. In an interview with Yahoo Finance in November, he predicted that mortgage rates could increase to 8% in 2025.

These days, his rate prediction is not quite as dire. Yet as the nation continues to wait for the Federal Reserve to cut short-term interest rates, he thinks the growing federal deficit might render a Fed rate cut unlikely to lower mortgage rates.

"When people look at the U.S, they look at the dollar, and they look at some of the other factors — the economy — it's really hard to get them excited about buying that long-dated Treasury paper," he told Yahoo Finance in a phone interview. "So, imagine if [Fed Chairman Jerome] Powell gave Trump what he wants tomorrow, and dropped the fed funds rate half a point. I'm not sure that would help."

Whalen believed a Fed rate cut simply wouldn't be enough to force mortgage rates down significantly. That was the case near the end of 2024, when, after three Fed rate cuts, mortgage rates actually rose.

Keep learning: How the Fed rate decision impacts mortgage rates

Research conducted by the National Association of Home Builders found that with 30-year mortgage rates around 7%, 31.5 million American households could afford a median-priced home of about $460,000. That would require a household income of more than $147,000.

However, as rates climb to 8%, affordability is even further impacted.

Just a quarter-point rate increase from 7.75% to 8% would remove about 850,000 households from the market.

Learn more: How much house can you afford? Use Yahoo Finance’s home affordability calculator.

When was the last time mortgage rates touched 8%? According to Mortgage News Daily data, it was less than two years ago, on Oct. 19, 2023. But for just one day.

However, if a series of events — perhaps a variation of what has been described above — were to become reality, we might see 8% or higher mortgage rates for much longer than one day.

Learn more: Will mortgage rates go up to 7% — and if so, when?

Mortgage loan originator Dan Frio said that, yes, clients still ask when rates will fall back to 3%.

"But we’re starting to see a shift. More people are adjusting their expectations and focusing on what they can afford now rather than waiting for the perfect rate," Frio told Yahoo Finance in an email.

For example, he remembered September 2024 when mortgage rates fell close to 6% and loan activity spiked for both purchase applications and refinancing.

"That shows that buyers are willing to act when the market gives them a window, even in the 6% range," Frio said. "It’s no longer about chasing 3%, it’s about recognizing opportunity when it comes."

He said he helps clients shift their focus from just the interest rate to the bigger financial picture.

"We talk about affordability, monthly payments, and long-term wealth-building through equity," Frio noted. "My advice to buyers today: If the home fits your life and the payment fits your budget, make the move. Rates will always fluctuate, but opportunities — especially in real estate — don’t wait forever."

Read more: Which is more important, your interest rate or house price?

With a fixed-rate mortgage, your monthly principal and interest payment won't change due to rising interest rates. However, if you have an adjustable-rate mortgage and are beyond your introductory rate period, your payment is likely to move higher according to the terms of your loan.

Many people do, often thinking they may have the opportunity to refinance their mortgage later. However, deciding to buy a house is based on several factors beyond interest rates. Affordability is determined by the price of the home you want to purchase, the down payment you have saved, and the debt you currently carry. In addition, you'll want to consider the number of years you want to remain in the city and the house you are considering. That can be related to employment, children, and other personal considerations.

The highest mortgage rate recorded by Freddie Mac was 18.63% in October 1981, and that was with more than two discount points applied. The 54-year average for a 30-year fixed mortgage is about 7.75%. From a historical point of view, a high mortgage rate would be somewhere between the two. From a practical standpoint, and for prospective home buyers, a high mortgage rate is likely any interest rate that makes their monthly loan payment unaffordable.

Laura Grace Tarpley edited this article.

Mortgage rates haven't moved higher in eight weeks, and this week they took a dive. The average 30-year fixed rate is down 15 basis points this week, and buyers are noticing. Freddie Mac reports that purchase loan applications are seeing the highest year-over-year growth in more than four years.

This could leave potential home buyers wondering, “Is this a good time to buy a house?”

In this article:

Are mortgage rates dropping?

So, will mortgage rates go down at all this year?

Should you wait to buy until mortgage rates go down?

Strategies for buyers in today’s mortgage market

FAQs

As of Sept. 11, Freddie Mac reported that rates for 30-year fixed-rate mortgages were 6.35%. This time last year, mortgage rates were averaging 6.20%.

In situations like these, it pays to look at the numbers. Here’s the Freddie Mac data on mortgage rates for the past 52 weeks as of Sept. 4, 2025:

30-year fixed-rate mortgage: 6.08% to 7.04%

15-year fixed-rate mortgage: 5.15% to 6.27%

If you just go by the numbers, rates on both 30-year and 15-year fixed-rate mortgages remain below the highs noted above. But, yes, mortgage rates have fallen recently. Will they keep dipping?

Dive deeper: Will mortgage rates go back up to 7%?

If you’re looking for a substantial interest rate drop in 2025, you’ll likely be left waiting. The latest news from the Federal Reserve and other key economic data point toward steady mortgage rates on par with what we see today.

When the Fed — the common nickname for the Federal Open Market Committee (FOMC) — held its July 2025 meeting, it voted to keep the federal funds rate the same for the time being. After cutting its rate three times at the end of 2024, it has yet to slash the rate in 2025.

That federal funds rate tends to directly influence rates on shorter-term lending. While mortgage rates aren’t directly based on the fed funds rate, they typically mirror fed fund rate trends. So, if the fed funds rate goes up, mortgage rates will likely follow. The inverse is also true.

The next Fed meeting is set for September 16 and 17. According to the CME FedWatch tool, there’s almost no chance that the fed funds rate won't be cut at this meeting. However, that doesn’t necessarily mean mortgage rates will follow suit. When people anticipate a fed funds rate cut, mortgage rates usually fall in the weeks leading up to the meeting.

And they have.

Learn more: How the Fed rate decision impacts mortgage rates

While short-term lending rates closely follow the fed funds rate, mortgage rates more closely follow the 10-year Treasury yield. As of Sept. 10, the 10-year Treasury yield sat at 4.03% — up from 3.65% a year prior.

You’re probably wondering why today’s mortgage rates aren’t in the 4% range, right?

To determine current mortgage rates, lenders add a “spread” to the 10-year Treasury yield. The spread is simply the difference between the rates consumers pay and the rate on the 10-year Treasury. Without getting too much into the weeds, charging a spread helps mortgage lenders cover costs associated with making loans to the public and the risk of providing such loans.

For example, the current average 30-year fixed mortgage rate is 6.35%, and the 10-year Treasury yield is 4.03% — a spread of 2.32%.

Read more: When will mortgage rates finally go back down to 5%?

In short, no. You probably shouldn’t wait to buy a home until mortgage rates drop. Mortgage rates are just one part of the affordability equation. You also have to consider home prices, a factor of housing supply and demand.

The current housing market is in a crunch. To put it simply, buyers outnumber homes for sale, especially homes in price ranges accessible to the first-time home buyer. When supply and demand are out of balance like this, home prices tend to remain high since sellers know they’ll have multiple buyers interested.

According to data from the Federal Reserve Bank of St. Louis, the median sale price of single-family homes has generally trended upward since Q1 of 2009. At that time, the median sale price was $208,400. The median price had risen to $410,800 by Q2 2025.

While recession speculation has recently increased, prospective buyers likely won’t see much relief in a true recession. If interest rates drop like they tend to do in recessions, that will increase the number of people looking to buy and lock in a lower interest rate. That drives up demand for the already limited supply of homes.

To truly save, buyers need both interest rates and home prices to drop. Mortgage rates are inching down this month, and housing prices are stagnant or even lowering in certain parts of the country. Still, rates are higher than they were this time last year, and prices are still increasing in many cities. Situations may be improving for buyers, but there’s a lot of work to be done.

Keep reading: Do mortgage rates go down in a recession?

If you crave the comforts of homeownership, the best strategy in today’s market may be to buy what you can afford. Whether that means a smaller house or a condo instead of a single-family home, owning something puts you in a position to start building equity.

Yes, shopping for the best mortgage lenders with low rates and fees is crucial when getting a mortgage. But to help you find your ideal home that balances affordability and desirability, it pays to adopt a curious mindset and consider lesser-discussed financial tools.

There’s no better time to learn more about your local real estate market than today. By adopting a sense of curiosity, you could discover that your city has more to offer housing-wise than you previously thought.

You may want to take weekend excursions to lesser-known neighborhoods and suburban developments beyond the city limits. You never know what you’ll find that could expand your idea of what “home” looks like — including new developments, school districts, and types of homes.

Learn more: This map shows average mortgage rates by state

If you’re looking to spend less on a home in today’s mortgage market, a house needing a bit of TLC could help you do just that. Loans like the FHA 203(k) mortgage can roll your purchase and renovation costs into one convenient loan. When you qualify and have an accepted offer, your lender immediately funds the home’s purchase price and puts the cost of renovations into an escrow account. As you make repairs, funds get dispersed.

How would it feel to have a longer commute yet come home to a house you love? Master-planned communities tend to crop up outside major cities, offering amenities like parks, shopping, and top-notch schools — all in exchange for a longer commute. These areas could look a lot more palatable if they offer commuting options like park-and-ride or commuter rail. Dare to consider parking the car and taking public transit if it could get you into the home of your dreams.

While shared walls, floors, and ceilings might not immediately scream “dream home,” they could help you find an affordable home in a terrific area. Condominiums come in various shapes and sizes, from apartment-style flats to townhomes. Depending on the area, you might even score a small backyard. However, be sure to consider HOA fees when calculating your monthly payment.

While the monthly payment on a 15-year mortgage will be higher than the typical 30-year, these loans have plenty of upsides. Not only will you pay off your home on a speedier timeline, but you’ll also likely score a lower interest rate and save a ton on interest over the life of your loan.

To make today’s mortgage rates more palatable, look into rate buydown options. An interest rate buydown lets you pay cash up front in exchange for a reduced interest rate on your mortgage. Buydowns can be permanent or temporary (for your loan's first one to three years, for example). Even a few years of lower rate relief can make today’s home prices more affordable.

Learn more: What will mortgage rates do over the next five years?

Mortgage rates probably will not drop significantly through 2026. The August Fannie Mae Housing Forecast predicts that rates will continue to decrease gradually but will stay just above 6% throughout 2025 and 2026.

Compared to historical mortgage rates, 7% isn’t considered a high rate. While it might be high compared to pandemic-era rates that were sub-3%, it’s on par with mortgage rates in the 1990s, and considerably lower than the double-digit rates seen in the late 1970s and early 1980s.

It’s not impossible to get a 3% interest rate, but doing so requires the perfect set of circumstances. You’d need to find a homeowner with an assumable mortgage — one that can be passed to a new owner at the same interest rate as the original loan. Assumable mortgages are generally government-backed loans from agencies like the VA, FHA, or USDA.

Laura Grace Tarpley edited this article.