Is it Finally a Buyer’s Housing Market? What to Know About Home Prices and Rate ‘Lock-In’

The housing market has experienced unprecedented fluctuations over the last few years.

For the past several years, homebuyers have felt the weight of high prices, bidding wars, and high mortgage rates.

But as we approach 2025, it seems the landscape might be shifting.

After years of rapid home price increases, there are signs that prices are beginning to stabilize, and some analysts suggest that we might be witnessing the beginning of a buyer’s market.

In this article, we’ll explore the current state of the housing market, the factors driving change, and what it means for potential homebuyers.

Home Price Gains Are Slowing Down

Over the last five years, home prices have surged by an average of approximately 50%, depending on which measure you use.

The pandemic had a huge impact on the housing market, leading to an unprecedented demand for homes.

With mortgage rates at historically low levels, many Americans reevaluated their living situations, moving to different cities or even states.

This dramatic shift caused home prices to skyrocket, leading to an increase in home equity for homeowners but making it increasingly difficult for buyers, especially first-time buyers, to break into the market.

Despite the rapid price growth, many analysts, including the Mortgage Bankers Association, are forecasting a much slower increase in home prices moving forward.

The Association expects home prices to rise by only 1.3% in 2025, while economists at Fannie Mae are predicting a 4.1% price increase.

These projections are a sharp contrast to the rapid growth observed during the pandemic era.

While it’s promising that prices are expected to rise more modestly, some experts caution that the same predictions have been made in the past, only to be thwarted by the stark imbalance between demand and available housing supply.

If demand continues to outpace supply in key regions, it’s possible that prices could remain elevated for a while longer.

However, the current trend of slowing price increases is a welcome sign for many prospective homebuyers.

What’s Behind the Slowdown in Prices?

A number of factors are driving the slowdown in home price growth.

The most notable is the increase in mortgage rates.

As of the end of 2024, mortgage rates hovered between 6% and 7%, significantly higher than the near-record lows seen during the pandemic.

These higher rates have had a cooling effect on demand, making homes less affordable for many buyers.

Additionally, the supply of homes on the market is starting to catch up.

Many homeowners who have held onto their properties during the pandemic due to ultra-low mortgage rates are beginning to list their homes for sale.

This increase in listings, while still not enough to fully balance out the market, is helping to ease some of the pressure on home prices.

An increase in available homes for sale provides more options for buyers, which could enhance their bargaining power.

Is the ‘Mortgage Rate Lock-In’ Over?

One of the primary factors that has kept homeowners from selling their homes and entering the market in recent years has been the so-called “mortgage rate lock-in.”

This occurs when homeowners are hesitant to sell their properties and assume new mortgages with higher interest rates.

As of the fourth quarter of 2024, 72% of all outstanding mortgages had rates below 6%, and more than half of these loans were locked in at rates below 4%.

For many homeowners, the prospect of moving and taking on a mortgage with rates in the 6%-7% range was not an appealing option.

However, anecdotal evidence suggests that the lock-in effect is beginning to thaw.

Real estate agents, such as David Palmer from Redfin, have observed that more homeowners are ready to list their properties despite the higher mortgage rates.

In Seattle, Palmer has seen an increasing number of homeowners willing to move, saying, “There are so many people that post-pandemic are like, OK, rate be damned.”

This shift in sentiment may be due to several factors, including the start of the spring homebuying season and a broader acceptance of the new reality of higher rates.

While it’s difficult to pinpoint the exact reason for this shift, the increase in homes listed for sale is clear.

In April 2025, Realtor.com reported that the number of active listings had risen by more than 30% compared to the previous year.

This increase in supply is one of the key reasons why buyers may finally be getting a break after years of being in a highly competitive, seller-driven market.

Buyer-Friendly Conditions Are Emerging

While it’s still too early to call this a full-fledged buyer’s market, experts are beginning to see signs that conditions are improving for buyers.

A more balanced market could finally provide some relief to prospective homeowners, particularly those entering the market for the first time.

First-time buyers may find it easier to negotiate prices, especially as more sellers begin to adjust their expectations.

In fact, many sellers are making price cuts in response to weakening demand.

According to Realtor.com data, 18% of home listings in April had price reductions, the highest share for that month in data going back to 2016.

This trend suggests that sellers are becoming more flexible, especially in areas where affordability challenges are starting to dampen demand.

David Palmer of Redfin believes this shift is a positive development for both first-time buyers and those looking to trade up.

“I do think this can be a good opportunity for people looking to buy,” he told USA TODAY. “First-timers can actually negotiate something.

” The slower pace of the market allows buyers to take more time weighing their options, a luxury that was not available during the frenzy of the past few years.

Is It a Buyer’s Market Yet?

While it’s still too soon to declare that the market has officially shifted in favor of buyers, experts are cautiously optimistic.

Some regions are seeing a stronger demand for homes, while others are experiencing a slowdown in activity.

As the market continues to evolve, it’s important to remember that the national housing market is increasingly localized.

This means that while some markets may be seeing more favorable conditions for buyers, others may continue to be seller-driven.

Despite the uneven landscape, there is a clear trend emerging: price reductions and more options for buyers.

In April 2025, 18% of listings had price cuts, which is a significant increase compared to previous years.

This suggests that sellers are adjusting their expectations in response to affordability concerns and weaker demand in certain areas.

It’s a sign that the market may be cooling, and conditions for buyers could improve further.

The Changing Dynamics of the Housing Market

The housing market’s evolution is being driven by several interrelated factors.

Mortgage rate increases have made home buying more expensive, forcing buyers to be more discerning and cautious.

At the same time, more homes are coming onto the market, which increases competition among sellers.

As a result, buyers now have more options, and some may be able to negotiate lower prices or more favorable terms.

Furthermore, the slowing pace of home price growth is providing relief for many buyers who have struggled to enter the market in the past.

The combination of more listings, slower price appreciation, and less intense competition is creating an environment where buyers can make more informed decisions and take their time.

Conclusion

While it’s not yet clear if we’ve fully entered a buyer’s market, the signs are promising for those looking to purchase a home in 2025.

Home prices are expected to rise more slowly, and more homes are being listed for sale, giving buyers more options.

As the impact of the mortgage rate lock-in fades, more homeowners may choose to sell, further increasing the supply of homes on the market.

For first-time buyers and those looking to trade up, this could be a golden opportunity.

With prices moderating and sellers more willing to negotiate, prospective buyers may find that the market is becoming more favorable to them.

However, it’s important to remember that the housing market remains highly localized, and conditions can vary widely from one region to another.

Ultimately, the key takeaway is that the housing market is shifting, and while it may not be a buyer’s market yet, conditions are becoming more favorable for homebuyers than they have been in recent years.

As the market continues to evolve, buyers who remain patient and strategic will be well-positioned to take advantage of the opportunities ahead.

Table: Projected Home Price Growth in 2025

This table shows the varying expectations for home price growth in 2025, with different organizations forecasting more modest price increases compared to the past few years.

These projections indicate a slower-paced market, which may provide opportunities for buyers.