2025 Home Buyer Resolutions

What are your 2025 Home Buyer Resolutions?

Every year, Ilyce and Sam offer their readers New Year’s resolutions for home buyers, home sellers and their personal finances. This year, they’ve also added their 2025 Housing Trends. These are their 2025 Home Buyer Resolutions.

Despite high hopes for lower interest rates, 2024 continued to be a slog for home buyers. The more things change, the more they stay the same.

Since the start of the pandemic, mortgage interest rates rose from a low of about 2.5 percent for a 30-year fixed-rate mortgage to a high of around nearly 8 percent, before falling back in the 6 percent range this year.

And, it looks as though we’ll see 30-year fixed-rate loans priced in the 6 percent range through 2026, if housing and mortgage economists’ predictions hold true. That’s for people with great credit, at least over 760. If your credit score is lower, you can expect your interest rate to scale higher accordingly.

The other problem for home buyers is that housing prices have continued to rise this year. In April, 2020, at the start of the pandemic, the median price of homes was $317,100, according to The Federal Reserve Bank of St. Louis. As of October, 2024, the median home price was $420,400. You’ve got to earn a good living and have cash in the bank for your down payment, closing costs, moving expenses, etc. That’s tough to do if you’re living paycheck-to-paycheck, which so many Americans are these days.

As we wrote last year, many buyers have had to dramatically change their mindset if they were going to close on a home. The homes they’re buying are smaller. Many buyers looked to southern states, where prices are lower. They got help with the down payment.

A year ago, David Dworkin, president and CEO of the National Housing Coalition, wrote that “Housing affordability is the worst it has been in the lifetime of most Americans and there are no indications that it’s going to be any easier to buy or rent a home anytime soon.” In our mind, nothing much has changed.

Interest rates will likely stay above 6 percent through 2025 and even into 2026. The U.S. is still millions of housing units short. How many? Zillow says the U.S. is missing 4.5 million housing units. Realtor.com says the U.S. is short by some 6.5 million housing units, although it also says there are 5.6 million vacant homes. And, the National Low Income Housing Coalition estimates the U.S. is short 7.3 million homes.

We’ve always believed that the younger you are when you buy your first home, the richer you’ll be later in life. That’s because homeownership changes how you look at your finances. It affects the financial steps you take and decisions you make. Lock in your interest rate for 30 years and your payments will never change, which helps with budgeting.

So if you want to buy a home in 2025, here are a few resolutions you should make:

2025 Home Buyer Resolution #1: Save more than you think you’ll need. Trust us, you’ll need it.

When it comes to buying a home, you’ll need a down payment, cash reserves (typically three months of mortgage, tax, and insurance premiums in the bank), and enough to pay your moving expenses. It’s likely your new home may need any or all of the following: paint, carpet, drapes or blinds, cleaning equipment, furniture or furnishings. All of that takes cash, too.

2025 Home Buyer Resolution #2: Get your credit score over 760, if possible.

The average credit score in the U.S. is around 700. But, seniors have higher credit scores and they pull up those of Millennials and Gen Z. So first-time buyers typically get hit with higher mortgages than you might see quoted in the media. If you have a credit score over 760, you’ll typically get the lowest interest rate and best terms from a variety of lenders. And that will help you get the most for your money. To get there, pay your bills on time — never late. If you carry large balances on your credit cards but pay them off on time, you might consider paying down the balances at several intervals during the month to avoid having a high balance to pay off when your payment is due.

2025 Home Buyer Resolution #3: Make a housing budget and stick to it

It’s tempting to peruse websites like Zillow and Redfin and fall in love with a house you can’t afford. So find out ahead of time what you can afford, then resolve to stick to that budget. If you need more space or a particular school district, figure out in advance what trade-offs you’re willing to make in order to get the things you need in a home.

2025 Home Buyer Resolution #4: Listen to the experts you’ve hired

If you’ve hired an experienced agent (who works regularly in your neighborhood of choice), home inspector, and attorney (if you’re in a state that uses attorneys to close house deals), be sure to listen to their advice.

2025 Home Buyer Resolution #5: Read your buyer’s agent agreement and negotiate the commission

In the wake of the National Association of Realtors settlement, most sellers are no longer automatically responsible for paying the commission out of the sales proceeds. Instead, buyers are signing papers agreeing to compensate their agent if they buy a house. But nothing has changed, really. At least not yet. Buyers agents talk with sellers agents about sharing the commission. Listing agreements now may include a clause that allows sellers to pay the commission out of the proceeds.

Are sellers actually paying less? Maybe, or not. In some cases, some listing brokerage houses have increased the fees they charge sellers to compensate them for any lost revenue they might have deducted from payments to the buyer’s agents. Are buyers paying less? Same answer. What we are seeing is heightened awareness that commissions are negotiable. Whether you’re buying or selling, you should ask for a break on the commission and you may ask to have any other fees waived.

At the end of the day, it’s up to you to decide whether to buy a particular home. You may feel as though you’ll never find another home that you’ll like, so you have to make an offer. But here’s what Ilyce’s mother, Susanne, used to tell her buyers: “There will always be another house.”

Next week: New Year’s Personal Finance Resolutions