3 reasons buying a home could get easier in 2025 — unless you're a first-time buyer

• The red-hot US housing market could cool off slightly in 2025, making it easier to buy a home.
• Expect stable or declining mortgage rates and more housing inventory, according to Redfin.
• However, it's still prohibitively difficult for younger homebuyers to break into the market.

The American dream of home ownership has become increasingly harder to achieve in the last few years. Home prices are elevated, mortgage rates are high, and housing supply is constrained. That's not to mention the growing threat of climate change, which is driving up housing costs such as insurance, HOA fees, and property taxes in high-risk states.

There's both some good and bad news on the horizon for homebuyers, according to housing market experts.

The good news? On the whole, it'll be easier to buy a house in 2025. But the bad news, for younger homebuyers at least, is that's mostly just the case for boomers. Homeownership is actually looking as distant as ever for first-time buyers, especially Gen Z and millennials.

3 reasons it'll be easier to buy a house in 2025

First, housing prices are projected to increase slower than in previous years. Redfin economists Daryl Fairweather and Chen Zhao predict that median US home-sale prices will rise by 4% in 2025. Goldman Sachs has a similar outlook for 2025, predicting that US home prices will increase by 4.4%. That's roughly in line with median wage growth. Considering that US home prices shot up over 40% between March 2020 and January 2024, this sanguine prediction is good news for prospective homebuyers.

Another impediment to homeownership has been high mortgage rates, which have more than doubled in the last few years. The average 30-year fixed mortgage rate has risen from below 3% in 2021 to around 7%.

While a 7% rate is still high historically, it's a sign of improvement from this housing cycle's high of 7.8% in October 2023. And rates could come down further in 2025, according to housing market experts. Redfin expects mortgage rates to stay the same or decrease next year. Realtor.com forecasts mortgage rates to end 2025 at 6.2%.

Lastly, experts predict that new housing inventory will hit the market, bringing relief on the supply side. A Republican sweep 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 of LPL Financial, said that an increase in housing starts, or construction of new residential housing units, was a signal for more single-family homes hitting the market over the course of the next few quarters. According to Realtor.com, housing starts for new single-family homes could hit 1.1 million in 2025, a 13.8% increase.

All of these factors could improve the housing market going into 2025. Redfin predicts that home sales will increase anywhere between 2% and 9% next year.

No houses for young homebuyers

But unfortunately, if you're a first-time homebuyer, 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 looking likely that any new housing inventory that hits the market will go toward older Americans first.

"Instead, affordable homes will be snapped up by older buyers who are priced out of higher price tiers," Fairweather and Zhao wrote in a recent report.

Indeed, first-time homebuyers are having unprecedented difficulty in the housing market. It's typically more difficult for first-time buyers to purchase a home because they don't have funds from selling a previous home to use for a down payment and mortgage payments, Redfin said in a June report, but today's housing environment is especially hostile towards young buyers.

Wages simply haven't kept up with the pace of home price increases over the past five years. According to Elijah de la Campa, a Redfin senior economist, the cost of starter homes have increased twice as fast as incomes during that time. Additionally, for Gen Z and millennials, student loans and credit card debt are emerging as roadblocks to homeownership, as it's difficult to qualify for mortgages with a poor credit score and high levels of debt.

As a result, the median age of first-time homebuyers is now 38, according to the National Association of Realtors — an all-time high. That's up from 35 in 2023. First-time homebuyers are also an increasingly smaller proportion of the market, at just 24% in the 12-month period ending in June 2024. The year prior, that proportion was 32%.

Comparatively, boomers have an advantage in the housing market. According to Edward Yardeni, president of financial research firm Yardeni Research, boomers own roughly half of the nation's net worth and homeowner equity, giving them a leg up in the housing market. Now, as boomers age and look to downsize their homes or move elsewhere for retirement, they can take advantage of the home equity they've amassed from years of home ownership.

"Gen Zers, meanwhile, will keep living with family or renting until well into their 30s," wrote Fairweather and Zhao.