Welcome to BW’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn how to navigate the 2025 housing market with tips for buyers and sellers facing high rates, prices, and tight inventory.
What steps can you take to buy a home in a high-rate market? How can you prepare your home to sell for the best price? Hosts Sean Pyles and Sara Rathner discuss how buyers and sellers can navigate the 2025 housing market despite high rates, tight inventory and rising home prices.
BW mortgage reporter Holden Lewis joins the episode to share tips for buyers, including how to get pre-approved for a mortgage, the importance of budgeting for rising homeowners insurance premiums, and why timing the market is risky. He also shares smart strategies for sellers, including the value of curb appeal, documenting recent repairs, and how professional staging and photography can make a home stand out. Plus: Learn about broader housing trends, like the impact of “rate lock-in” on inventory, the connection between Federal Reserve policies and mortgage rates, and how changes to real estate agent commission rules are affecting buyers.
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
You want to buy a house this year, or maybe sell the one you’re in and trade up, or downsize? We’ve got the episode for you. Welcome to BW’s Smart Money podcast. I’m Sean Pyles.
With this episode, we continue our January series, Your Money in 2025. Today, Sara, we are checking in on the housing market, specifically the house market. It’s been a rocky couple of years for folks looking to buy their first house, or move out of one and into another.
Yeah, buyers have been facing the headwinds of both high mortgage interest rates and high home prices. Lose, lose. The market is tight, because people who bought before rates started to go up don’t want to leave those rates, and just in general, more people want to buy houses than the number of houses that are actually available. It’s all been a little bit stuck.
For a little while last year, it looked like things were maybe going to loosen up as interest rates started to come down, but then that trend reversed itself for a bit. Who knows what’s coming this year? We’re going to try to look into the crystal ball, and at the very least, give you some helpful tips for navigating the process, and getting ready for when you do decide you want to jump into the market.
That’s right. There are a lot of steps you can take now in anticipation of what you might want to do later in the year.
Well, we want to hear what you think. What are you working on in your financial life as we start the new year? Leave us a voicemail or text the Nerd hotline at 901-730-6373. That’s 901-730-NERD, or email a voice memo to
[email protected]
. Sara, let’s get into your conversation with our fellow Nerd, Holden Lewis, and get a sense of what the housing market might look like in 2025.
Holden Lewis, so glad to have you with us again on Smart Money.
All right, Holden, let’s start with an overview of last year, and where we stand with the basics of the housing market as we begin 2025. I’d venture an educated guess that interest rates were the big story last year, because they influence mortgage rates and so many other kinds of loans. It doesn’t really seem like there’s been much relief pricewise in most housing markets. What’s the 10,000-foot view at the moment?
Well, the 10,000-foot view is that home affordability, it really did take a hit in 2024. Home prices were higher than in 2023. Mortgage rates went up until May. Then they went down from June to September, and then they went back up again. When you look at that, it’s like there was a real hurdle in home affordability from April through July, which are the prime homebuying season.
Home prices were higher, and so were rates. That was kind of the main thing that happened, and then home prices fell in the fall. Then rates started rising again. All of that took a big whack at affordability.
Could you talk a little bit about the relationship between interest rates that are determined by the Federal Reserve and mortgage rates? Last year, mortgage rates were slowly coming down for a good part of the year, as you said, and then the Fed started to bring overall interest rates down, and then mortgages ticked back up. Walk us through what happened there, and what potential home buyers should be paying attention to this year.
The Fed sets the rate for an overnight loan among banks. Look, a one-night loan, it doesn’t really have much of a relationship with a 30-year mortgage, which lasts 11,000 nights. Mortgage rates respond to broader, longer-term economic signals, especially concerning inflation.
Mortgage rates tend to fluctuate based on the 10-year Treasury yield, which is currently rising due to concerns about potential inflation with increased tariffs under the Trump administration. This impacts potential home buyers who are looking at factors such as home prices, mortgage rates, and home availability. The lack of available homes for sale is a major issue, as buyers wish for more options.
While there are more houses on the market compared to previous years, they are staying longer due to high prices and interest rates, making it difficult for buyers to afford homes. Sellers are hesitant to list their homes due to rate lock-in, where they have low mortgage rates and are unwilling to give them up for higher rates on a new home.
To improve the housing market, mortgage rates would need to decrease to entice both buyers and sellers. However, rates are not expected to drop significantly in the near future. Additionally, there is a shortage of dwellings due to land use restrictions that hinder construction. The new administration’s plans for addressing these issues remain uncertain, with potential ideas including addressing undocumented immigrants and opening up federal lands for housing development. However, when it comes to preparing a house for sale, investing in cosmetic improvements like landscaping can often yield a higher return on investment. For example, spending $3,000 on new turf could potentially increase the value of your home by more than $3,000. This is a rare occurrence in the real estate market, where investments in home improvements typically do not result in a higher return than the initial cost. So, it’s worth considering making these cosmetic upgrades to increase the appeal of your home to potential buyers and maximize your selling price. Improving the lawn, landscaping, and front door by painting it can provide a significant return on investment. These are weekend projects that can be done by yourself if you’re handy, or you can hire someone to do it for you.
Historically, mortgage rates have been much higher in the past, with rates reaching as high as 18% in the early 1980s. Rates have been below 5% for an extended period in recent years, but are now expected to stay above 6%. Despite this increase, today’s buyers are adjusting to this new normal.
A recent change in the real estate industry allows home buyers to set their own agent’s commissions, resulting in a decrease in total commissions nationwide. However, some believe that this change may put first-time buyers at a disadvantage. Sellers still hold the negotiating advantage in the current market.
To succeed as a seller, it is important to price your home reasonably, improve its appearance, and hire a professional photographer for online marketing. Staging your home with clean and tidy furniture can make a big difference in attracting buyers. Hiring a professional photographer with quality equipment is essential for effective real estate photography.
In conclusion, taking the time to improve the appearance of your home, both inside and out, can greatly increase your chances of selling quickly and for a good price. I was fortunate to have a very relaxed landlord during that time.
The importance of staging cannot be overstated. Set the mood with candles, create a cozy atmosphere, bake some cookies – go all out.
A big thank you to Holden Lewis for his assistance today, and although we are already a few weeks into the new year, Happy New Year.
You’re welcome. Thank you.
Sara, I understand that the past few years have been challenging for home buyers, but as someone looking to sell their home this year, I am somewhat relieved that it continues to be a seller’s market. I am curious to see how the new commission structure will impact things.
I am too. The thing about needing to move is that you’ll do it no matter what the economic situation is.
Exactly. Focus on what’s best for you in terms of your housing and financial plans. Design your budget, spending, and savings around your goals, rather than waiting for external factors to change.
Planning based on what you know is crucial. In our next episode of Your Money in 2025 series, we’ll discuss making a career change and the value you bring to the market.
Confidence is key when considering a job search or career change. You have a lot to offer, so remember that and show up with confidence.
That’s all for this episode. If you have a money question, reach out to the Nerds at 901-730-6373 or email us at [email protected] Follow the show on your favorite podcast app for new episodes.
This episode was produced by Tess Vigeland, with editing and fact-checking support. Megan Maurer handled audio mixing, and thanks to BW’s editors for their assistance.
Disclaimer: We are not financial advisors. The information provided is for educational and entertainment purposes and may not be suitable for your specific circumstances.
Until next time, turn to the Nerds. sentence: The quick brown fox jumps over the lazy dog.
Rewritten sentence: Over the lazy dog jumps the quick brown fox.