The last few years of the housing market have been anything but predictable, with rate changes and ongoing bidding wars. Ahead of the 2025 home buying season, Rockland Trust’s SVP and Director of Residential Lending Bob Driscoll is here to provide six trends he’s been seeing to give you a sense of this year’s market.
One of the main driving factors of the housing market in the last few years has been a lack of inventory. While homebuying is still happening, the increased competition means that prices remain steep – and the rental market in Massachusetts is expensive, too. There’s an acute need for more housing inventory, and this is likely to continue to impact the market and homebuyers in 2025.
To gauge the current market and where it’s heading, Bob and his team look for “leading indicators” – signals that give housing lenders a good sense of where things stand. For example, the fact that Bob’s team is generating more mortgage pre-approvals and credit applications than this time last year points toward a healthier market this winter and beyond.
But what exactly does a healthy housing market look like? Bob reminds us that a healthy market occurs when there’s a relatively even exchange between buyers and sellers, and when first-time homebuyers are able to participate and throw their names (and offers) in the ring. A healthy ratio of first-time home buyers is when they make up approximately 40% of the market.”
The Fed cut interest rates in September of 2024 and additional rate cuts are anticipated before the end of 2024. While prospective buyers may have been waiting for this move to buy, Bob thinks that the impacts of these cuts are more likely to be felt on the consumer debt side of things. While rates now are middling a bit, Bob thinks that rates will be down from the highs experienced in 2023.
“We are seeing more people jump into the process, but fewer people are locking in their rate to see if mortgage rates drop,” Bob explained. Rate changes may be top of mind for some homeowners as well.
Bob’s team also anticipates that some will use this opportunity to refinance their mortgages. Some people refinance to reduce their payment amount or obtain a more favorable rate. Others refinance as part of a debt consolidation strategy to pay off high-interest debt like credit cards.
Prospective buyers should keep this financial option in mind for later down the line too. Instead of trying to time a potential mortgage rate drop, Bob advises that if you find a home you love and you can afford it, you should buy the home.
“While you have the option to refinance your mortgage when there is a more favorable interest rate, you will not always have the option to purchase your dream home,” Bob shared. “The house is the most important part of the equation—so be sure to keep it top of mind when making your decision, regardless of the rate environment.”
High home prices and rental prices are still squeezing first-time and younger buyers – but that doesn’t mean you need to give up hope!
Bob encourages first-time buyers to explore all support options available to them. Buyers may be eligible for down payment assistance programs at the town, city, and state levels and not realize it.
As always, he reminds everyone to think through their motivation to buy, instead of bending to societal peer pressure or other factors. Although it is important for first-time buyers to understand the economic conditions, it is more important for them to make sure the home matches their current needs and how they expect to live for the next 3-5 years.
Support for First-Generation Homebuyers
Inventory remains low, which is not allowing the pendulum to swing to the buyers as quickly as one would have thought. We are certainly seeing homes staying on the market for longer periods of time and seeing fewer houses going for far over their asking prices.
“We are seeing fewer buyers willing to pay significantly appraised values of homes, which is a positive sign for the housing market after the last few years,” Bob said. Bob cautions, however, that this will not drive a dramatic shift.
“As an example, I sold my house in June of 2024. It wasn’t on the market – someone called me offering to buy my house and the transaction was complete in three weeks,” Bob shared. “This is not the way the housing market is designed. It’s beneficial for those in a home, but it can still be challenging to break through.”
Compared to where the market was a few years ago, the dynamic is beginning to shift between buyers and sellers. Instead of committing to homes on the spot before they’re snatched off the market, buyers should take time to have a little more breathing room to check out the neighborhood, conduct home inspections, and ensure they feel committed to their decision.
Making the Most of a Hot Housing Market
Housing is personal. Our homes are where we spend so much of our time outside of work (or at work, if you have a hybrid or remote job), as well as where we spend quality time with our loved ones. Therefore, there are a lot of emotions wrapped up into the process of buying or selling a home.
A few years ago, sellers had the upper hand and many prospective buyers felt fatigued and dejected by the market. Now, buyers are slightly more hopeful and thinking, “It’s a better market than it was, but how much more will prices drop?” Buyers are primarily concerned with having mortgage payments that feel reasonable to them.
Sellers who locked in lower mortgage rates during the early pandemic may remain reticent about selling and purchasing a different home with a higher rate. Sellers also want to make sure they’re selling their homes for the highest possible value, leading to homes being listed for longer periods before sellers are willing to drop their prices.
There are also a lot of people who are perfectly content staying in their current homes, especially those who embarked on home improvement projects during COVID are now feeling settled and comfortable in their space. Some of these home upgrades, like pools, don’t always translate into higher home values, which is on the minds of these folks.
The housing market doesn’t operate in a bubble. Prices of homes, mortgage interest rates, inventory, etc., are all influenced by outside forces like cultural shifts, governmental policies, the economy and more.
Mortgage lenders like Bob look at what’s happening in the world around them to predict how the housing market might be impacted. For example, following trends in housing development, urban planning, community infrastructure and remote work can provide insights into the future of the housing market.
If you’re looking to buy or sell a home in 2025, or simply want to chat with an expert about how trends in the housing market might affect your short- or long-term plans, reach out to our experienced team of residential lenders at Rockland Trust or drop by your local branch today.
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