Interest Rates and Real Estate: Looking at Spring 2025 and Beyond

While interest rates have been a central part of the conversation about the real estate market for as long as there have been mortgages, they seem to be even more of a focal point in recent years. During the earliest stages of the COVID-19 pandemic, policymakers lowered interest rates in an effort to help stabilize the economy in uncertain times.

However, as was always destined to be the case, those rates had to be increased in order to course-correct the market.

While much of 2020 saw record lows when it came to mortgage rates, the US real estate market has experienced record highs in the years since. While most experts agreed that rates would have to increase to offset the period of low rates, few believed that rates would stay as high as they have for such a long period of time.

Historically, spring has been the hottest time of year in the real estate market. Will that be the case this spring, or are we in for another extended period of little to no movement on the market? To no one’s surprise, the answer largely revolves around what’s going to happen with interest rates.

Where Are Mortgage Rates Today?

At one point during the month of February, it looked like mortgage rates were trending downward. While rates in the 6% range were certainly higher than they were five years ago, it was significantly lower than rates were at various points from 2022 through 2024.

As of March 18, 2025, the average interest rate for a 30-year fixed mortgage was 6.662%. That figure is slightly higher than it was only a day earlier. This number, while lower than it was a couple of years ago, is still higher than many industry insiders believed it would be at this point.

Are Interest Rates Going Up or Down?

In September 2024, the Federal Reserve began reducing the federal funds rate, which led many insiders to assume that rates were going to drop. However, the decision didn’t produce any sort of extended period of lower rates.

After a short-lived decrease in rates, mortgage rates quickly slid back toward the 7% mark, where they had been for most of the previous four years.

In January 2025, things took a more startling turn when rates moved beyond 7% for the first time since May 2024. For context, in January 2021, Freddie Mac, the same source that reported 7% interest rates in January 2025, reported that mortgage rates were at 2.65%.

Rates being in the 6.6% range do mean that rates moving in the right direction. However, that good news comes with a bit of a caveat. Barring another international crisis like the pandemic that altered the global economy in 2019 and 2020, most experts agree that we will never see interest rates that hit 3% or lower in our lifetimes.

What to Expect in the Housing Market in 2025?

Real estate brokers around the United States count down the days until springtime starts, as it’s traditionally the beginning of their busiest time of year. As daytime hours get longer and better weather moves in, the housing market typically heats up.

While the market has seen more activity during spring and summer during the years with higher-than-normal interest rates, it has not returned to the numbers posted in more successful years.

The last few years have also seen the housing market try to navigate its way through an inventory crisis.

For years, the housing market has seen the available supply of homes fail to meet the needs of buyers on the market. This has created a market that significantly favors sellers, leading to higher prices. When combined with high interest rates, these higher asking prices have forced many potential buyers to the sidelines.

As is always the case, policies that aren’t directly linked to real estate will largely impact the market. For instance, tariffs and immigration policies are both expected to impact the housing market in various ways in the coming months.

Ultimately, how much those outside factors impact the market depends on multiple factors, so it’s impossible to completely determine how they’ll impact the market.

One of the biggest questions surrounding the market involves interest rates. It’s expected that rates will likely settle around 6.5%, which isn’t too far from where they’ve been in the past. While we’ll never see COVID-era rates again, we also shouldn’t have to worry about rates reaching the levels they made it to in October 2023, when they reached nearly 8%.

There is also some optimism surrounding the housing inventory. In January 2025, there was inventory growth, meaning that more homes were for sale than were listed the previous month. While it wasn’t a drastic increase, it did mark the 15th straight month of housing inventory moving upward.

Is 2025 the right time for you to buy a home? The answer to that question depends on several factors, including your local market, your financial goals, and the amount of money that you have at your disposal. It’s entirely possible that rates decline even more between April and August of 2025, but waiting can be a gamble.

A Glimpse Into the Future

The housing market is one of the hardest things to predict. Even the brightest minds in the field can miss when publishing their projections for the future.

However, the decline in rates in recent weeks combined with the increase in inventory paints a hopeful picture. If you’re considering buying a home in the coming months, the market is likely to be better to you than it would have been a year ago.