Let's start with something positive. It's not the worst time ever to buy a house. Feel better? Yeah, we get it.
Mortgage rates are higher than in recent memory. Houses, for the most part, are in short supply. The economy, with the threat of tariffs and inflation, are making us all a little nervous.
Considering all of the factors that exist in the 2025 housing market — is it a good time to buy a house?
Read more: How inflation impacts mortgage rates
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There is some good news, and we'll take that when we can get it. There are some important signs the real estate market is "normalizing."
1. More homes are on the market
The number of houses for sale is rising. Realtor.com research of the May 2025 market, the latest data available, revealed that the number of homes for sale rose 31.5% year-over-year. That's a new post-pandemic high.
2. Price cuts are increasing
Nearly one-in-five homes (19.1%) had listing price reductions. That's the highest percentage of May price cuts since 2016. It's also the fifth month in a row of growing sale price reductions.
3. Time on the market is rising
An average home for sale was on the market for 51 days in May. That's six days longer than the same time last year.
4. Credit approval is getting easier
In a recent report, the Mortgage Bankers Association said that mortgage credit standards are loosening.
“Credit supply increased to its highest level since August 2022," said Joel Kan, MBA’s Deputy Chief Economist, as lenders offered a greater variety of loan types to support the spring homebuying season.
5. Mortgage rates
In the past 12 months, 30-year mortgage rates slipped to a low of 6.08% in late September but haven't met that low-water mark again. According to Freddie Mac, the highest rate over the same period has been 7.04%. While that may not seem like spectacular news, at least interest rates are breaking out on the higher side.
In a recent analysis, Realtor.com Chief Economist Danielle Hale noted that mortgage rates remain in the high 6% range.
"We’ll need to see some policy news or bigger data shifts to drive a larger change in mortgage rates," she said.
With the Federal Reserve once again holding off on lowering short-term interest rates at its meeting on June 18 — in spite of President Trump's push for a rate cut — there doesn't appear to be any policy changes on the horizon to nudge mortgage rates lower.
To navigate today's mortgage rates, consider:
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More than half of home loan borrowers (56%) only get a preapproval from one lender. That reduces your bargaining power and limits an opportunity to find a better interest rate from a more business-hungry lender. Zillow research says that 45% of first-time home buyers who shop multiple lenders got a better rate.
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Putting down a larger down payment can earn you a better mortgage rate.
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Some buyers get below-market mortgage rates by negotiating a buydown or special financing from a seller or builder.
Take action: Use a mortgage calculator to determine the monthly payment you can afford. You can then learn the home price, down payment, credit score, type of home loan, and mortgage interest rate to meet your home-buying goal.
Read more: How to get the lowest mortgage rates
While gradually improving, the shortage of houses remains a big squeeze on home buyers. Freddie Mac estimates the U.S. has a deficit of 3.7 million houses to buy or rent.
"It took us about a decade to get into this housing deficit, and it's probably going to take us about a decade to get out," said Rob Dietz, chief economist for the NAHB, in an article.
"Our expectation that home sales activity will remain limited, combined with the elevated rate environment, reaffirms our view that on a national level the 2025 housing market is shaping up to feel a lot like 2024," Mark Palim, chief economist for Fannie Mae, said in a press release. Freddie Mac estimates 5.8 million houses have been added to the market in the past four years. Unfortunately, demand has increased by an equal amount.
Take action: Consider expanding your search to more affordable areas close to your favorite neighborhood if it's too pricey.
Dig deeper: How much house can I afford? Use the Yahoo Finance affordability calculator.
New home sales increased 10.9% in April, the latest data available, compared to one year ago, according to the U.S. Census Bureau. Inventory of newly-built homes also rose in April, up nearly 3.3% from one year ago.
Realtor.com expects 1.1 million new homes to be built this year. That's nearly a 14% increase over 2024 — with builders focusing on smaller, more affordable houses.
Take action: If you want to buy a house now, consider new construction. You may be able to choose some finishes or make an even better deal on a spec home that's been on the market for a while.
Learn more: Buying a new construction home — Pros, cons, and how to finance it
To answer the question of whether it's a good time to buy a house for you personally, you must look beyond broad market forces. Buying a home is more than considering macroeconomic factors. It's an important life decision based on your personal and financial situation.
Have questions about buying, owning, or selling a house? Submit your question to Yahoo's panel of Realtors using this Google form.
When you rent, the decision to move is broken down into six months, or a year or two at a time, as your lease renews. But every dollar-related detail makes a home purchase a medium- to long-term investment. Buying a house includes various costs: the down payment, closing costs, and financing fees, moving expenses, property taxes, and perhaps selling the house you're in now.
Homeownership requires a long timeline. How you make a living, your friends, family, and even community amenities all come into play.
Dive deeper: Should you buy a house? How to know if you're ready.
A primary consideration: your job. Will it require a location change anytime soon, or can you live where you please? Is your income steady and all but assured?
One of the significant factors that will qualify you for a home loan is your credit score. It's important to know it before applying for a mortgage.
For the most common loan, a conventional mortgage not backed by a government agency, you generally need a FICO Score of 620 or better.
FHA loans can allow a credit score as low as 580 with 3.5% down. VA loans issued to qualified military service members and veterans don't officially have a minimum credit score, though some lenders will require a FICO Score of 620.
Of course, minimum scores are the entry-level to qualifying; the higher your score, the better the loan terms you'll be offered. Most importantly, that can mean you'll pay a lower annual percentage rate over the life of the loan. You may also have more room to negotiate on fees.
As a benchmark to where you stand, the median credit score on a new mortgage in the second quarter of 2024 was 772, according to the New York Federal Reserve.
Read more: The credit score needed to buy a house in 2025
A primary financial metric lenders will use to determine your creditworthiness is your debt-to-income ratio.
Fannie Mae, a government-sponsored entity that provides liquidity to the home loan market, looks for a maximum total DTI ratio of 36% of "the borrower’s stable monthly income." Exceptions can allow for total DTIs up to 50%, but it's usually best to avoid working on the edges of qualification if you can.
You can calculate your DTI by dividing your total recurring monthly debt by your gross (before taxes and other deductions) monthly income.
Include debt such as monthly mortgage payments (or rent), real estate taxes, and homeowner's insurance. Also, add any car payments, student loans, and the monthly minimum due on credit cards. Remember any personal loan payments and child support or alimony.
Do not include debt such as monthly utilities — like electricity, water, garbage, or gas bills — or car insurance, television streaming subscriptions, or cell phone bills. You can also exclude health insurance costs and miscellaneous expenses such as groceries or entertainment.
Having a cash cushion in the form of emergency savings shows lenders that you are prepared for the unexpected. Of course, that savings account should also include …
A large chunk of your savings account should be dedicated to the down payment. A minimum of 3% down is required in order to qualify for a conventional loan targeted to first-time home buyers — or ideally, 20% to avoid private mortgage insurance. Yes, zero-down options exist if you are eligible for a VA- or USDA-backed loan.
According to Realtor.com, the median down payment in the third quarter of 2024 was 14.5% — about $30,300.
Dig deeper: How much down payment do you need to buy a house?
Buy smart and shop a lot. Relentlessly shop interest rates and mortgage lenders for the best loan offers and justified fees. Get a written preapproval from your lender, then shop for a house you can love and can afford. Your home buying competition is.
According to Zillow, when it comes to first-time buyers versus repeat buyers, first-timers are more likely to reach out to at least three lenders and three real estate agents.
Learn more: The best mortgage lenders for first-time home buyers
Mortgage rates tend to fall during economic downturns, so a recession would definitely qualify as a time when rates would likely drop. However, lower rates generally increase demand as more buyers enter the market, so house prices would likely rise. Buying a house at a time when both mortgage rates and home prices are favorable is a challenge. You probably shouldn’t try to time the housing market by waiting for a recession. Buy when it makes sense for you personally.
"Buy now" advocates might say that if you find the right house at the right price — and you're financially set — you should purchase the home now and look to refinance later. But what if mortgage rates don't drop substantially enough to justify a refinance in a few years? Only buy a house when you are comfortable with the terms you can get on closing day.
Locking in a mortgage rate is a short-term decision, generally lasting only 30 to 60 days — sometimes up to six months. There's little reason to agonize over it. Be comfortable with the rate on your Loan Estimate and start packing boxes.
Homes become more affordable as your income and savings grow. Ask any homeowner: Buying that first house was a stretch. The monthly payment loomed large. As months and years go by, it becomes less of an issue. Then, as home prices continue to rise, you're on the right side of the equation: The growing equity builds your net worth.
This article was edited by Laura Grace Tarpley.
