WSJ Your Money Briefing - Buying a Home in 2025: What to Know About the Real-Estate Market

Episode Date: March 30, 2025

High mortgage rates, low inventory and unaffordable prices have left a lot of prospective home-buyers on the sidelines again this year. In the first installment of our special series, “Buying a Home in 2025: Navigating the Crunch,” host Ariana Aspuru explores the challenges of today’s real estate market. She’s joined by Wall Street Journal reporter Veronica Dagher and Zillow’s senior economist Orphe Divounguy, who will provide insights on what buyers can expect in 2025 like the rising cost of home insurance, stubborn inflation, and if mortgage rates will fall. Plus, we break down how the National Association of Realtors settlement has changed the homebuying process. Additional episodes of the series drop on Sundays in April. Sign up for the WSJ's free Markets A.M. newsletter . Further Reading:  This 4-Bedroom Ranch in N.J. Tells You Everything About the Lopsided Housing Market   Home Buyers Are Finally Getting the Upper Hand Again   One House, Three Owners: The Ballooning Cost of the American Dream   Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode is sponsored by Northern Trust Wealth Management. There is more to being a successful entrepreneur than just good business practices. What is it about an entrepreneur's childhood that helped fuel their entrepreneurial spirit? What are entrepreneurs doing to cultivate this spirit in their own children and build a legacy beyond their business? Tune in each month to the Road to Why podcast by the Northern Trust Institute, where host Eric Schapea dives deeper with leading entrepreneurs on these topics and more. Find the road to why where you listen

to your favorite podcasts. We actually thought it would be relatively easy, but here we are and it's not. Five months and nine offers in, first time home buyers Scott Pair and his wife Michelle were anxious about their search. This is the bonus room. They currently live in a two bedroom apartment

in New York City, along with their one year old son and 25 pound Australian Labradoodle. But they're planning a move to New Jersey before their lease ends this summer. My wife and I have been smart about our savings and we always knew we wanted to make a purchase on a home and that requires a big down payment. So we're fortunate to be able to do that, although are we? Because we actually can't even do it if we wanted to right now.

And we always thought, well, once you save up, then you're good and then you'll get something. It's just not the case anymore. Here's your money briefing for Sunday, March 30th. I'm Arianna Aspuru for The Wall Street Journal, and this is the first installment of our three-part series, Buying a Home in 2025, Navigating the Crunch. Our loyal YMB listeners might remember that around springtime each of the past two years, we've taken a look at the housing market and what it takes to buy a home.

In 2023, foreclosures have hit certain people. And then not to mention the fact that home prices themselves have become so out of reach, frankly, for a lot of folks. And in 2024, we may eventually see those lower mortgage rates later in this year or early next year. But the thing is, you're most likely never going to see those 3% mortgage rates. For the first episode this time around, we'll take a deep dive into what things are like right now.

How has the experience of buying a home changed from the past few years? Have things shifted at all? The answer is both yes and no. We'll dig into it after the break. helped fuel their entrepreneurial spirit? What are entrepreneurs doing to cultivate this spirit in their own children and build a legacy beyond their business? Tune in each month to the Road to Why podcast by the Northern Trust Institute, where host Eric Schapea dives deeper with leading entrepreneurs on these topics and more. Find the Road to Why where you listen to your favorite podcasts. What are some of the main factors that dictate how quote unquote good the housing market

is? Yes. So it depends who you ask. That's my colleague, Veronica Dagger. She reports on personal finance and she's written extensively about the housing market. So sellers version of good is being able to sell your home quickly at the highest price with little to no repairs. Buyers will likely say being able to get a low mortgage rate, an affordable home price,

and homes that are quality, that don't need a lot of work. And so that's what their views will be very different from one another. Like Veronica said, for buyers, mortgage rates are a huge factor in the decision to buy a home. And lately... Small numbers, I feel like I've been here

for the past year saying, we're waiting for the housing market to thaw as the Fed starts cutting rates. The housing market needed a glimpse of hope and we got it this week. Some relief finally, right, for homeowners this week as mortgage rates continue to decline. Now, the Federal Reserve doesn't directly set mortgage rates, but it does adjust the federal funds rate, which in turn affects the cost of borrowing money more broadly.

And since September, the Fed's been gradually bringing rates down. But that's only part of the interest rate picture. The average rate on a 30-year mortgage usually more closely tracks the yield on 10-year Treasury notes. And those have been increasing recently. Mortgage rates are now hovering around 6.6 percent, according to Freddie Mac. Still a lot higher than a few years ago. When was the last time people were jumping to buy a home?

Was it the pandemic? During the pandemic, yes, the market was fast and furious. People were putting offers in sight unseen in certain cases, taking video tours and just buying homes without ever stepping foot in. Some people buying within 24 hours, waving inspections, putting in offers hundreds of thousand dollars over asked just to get that house. But since the Federal Reserve's rate also plays a big role

in regulating the economy, it's not just mortgage rates that buyers are worrying about right now. If you had to describe the housing market in three words right now, what would it be? Unaffordable, right? Unaffordable but improving. Orphe de Vungie is a senior economist at Zillow. Part of what he does is analyze data about how the housing market is doing.

And he says the housing picture is being affected by the labor market. People still have jobs and layoffs remain low, but you don't have the types of opportunities that you had in 2021 or 2022. For example, we went from the great resignation to the great stay. Quit rates have come down because job openings have gone down. And so people might be feeling a bit stuck in their jobs. And we know that when the labor market cools down and you get less labor mobility, you tend to also get less residential mobility. And of course, the total cost of homeownership has changed.

One thing bringing up the total price of owning a home? Home insurance. A few months ago, the Treasury Department looked at data from 2018 to 2022, and it found that the average homeowners insurance premiums per policy had risen 8.7% faster than the rate of inflation. And there's plenty more that's making homeownership extra expensive. According to data from Zillow, to add other costs, property tax and maintenance costs, and the total cost of owning a home

is significantly higher than it used to be. A first time home buyer today buying the typical home needs to make about $92,000 and put 20% down to afford the mortgage on the typical US home. That's down from 99,000, almost $100,000 in 2023. Right. So you see the improvement, small improvement, but the improvement, but still much higher than the $52,000 that you needed as a household income back before the pandemic.

When it comes to the pricing of homes right now, are buyers and sellers still very far apart on how much the home is worth? Compared to before the pandemic, yes, the gap is still there, but the gap is closing. And the reason the gap is closing is because we have more inventory than we had a year ago. Inventory. It's one of the biggest reasons home prices have been rising so fast in recent years. One of the biggest reasons home prices have been rising so fast in recent years. So more homes on the market means things look better than a year ago. But still not great. In January, the national supply of homes for sale was 16% below where it was five years

ago, according to the National Association of Realtors. But that's not the case everywhere. Some places like Texas, Colorado, and Florida are seeing inventory levels above what they were in 2019. You have markets like Miami, New Orleans, Jacksonville, Tampa, where you're seeing more activity because you have more inventory and buyers are in a much better place than they were just a year ago or two years ago. You're seeing markets where there's been a lot of housing construction over the course of the pandemic. Those markets have created pockets

of housing affordability. And in those markets, you still see pretty good activity for buyers. And we're seeing a lot of companies push for returning back to the office, whether it be three, four, five days a week. How is that impacting where people are looking for homes right now? The bargaining power between buyers and sellers in the housing market has shifted, but the

same thing in the labor market. It's clear workers have a little bit less bargaining power. And really that means that those markets that are major job centers are going to continue to see more pressure, more competition for buyers, right? Because unless they're able to keep up with the need of for housing, right? And I'm talking about the coastal markets, the Seattle's and the whole Pacific coast, especially Northern California, but also New York and Boston, those big job centers, Washington, DC. In those markets, the housing market remains somewhat tight. They don't build a lot of housing but also New York and Boston, those big job centers, Washington, D.C.

In those markets, the housing market remains somewhat tight. They don't build a lot of housing. And then if you have more workers returning to the office, price growth is going to remain somewhat stubbornly elevated. But many homeowners can't wait much longer to put their house up for sale. Life happens, you know. Here's my colleague, Veronica Dagger, again. A lot of people have these low rate mortgages, these, you know, sub 3 percent or sub 5 percent mortgages. A lot of Americans have those mortgage rates.

And that held people back for a long time. He said, I don't want to sell because I don't want to give it my mortgage rate. But you finally get to the place where, you know, you're getting a divorce. You had another kid. You got a job in another city and you have to sell. And so that's putting more inventory on the market as well. That's great news for some buyers. But before you jump in, there's one more big change to talk about. One that upends the entire process for someone buying or selling a home this year. That's after the break.

someone buying or selling a home this year. That's after the break. Step into the heart of private markets with me, Philippa Leighton-Jones, together with thought leaders and industry experts from across financial services. In partnership with UBS, Crafting Capital, the evolving world of private markets, is a series of exclusive conversations where we explore topics that may change the shape of the industry. The process of buying a home has undergone a major shift in the past year. For decades, sellers typically decided how much real estate agents got paid on both sides of the transaction. But WSD reporter Veronica Dagger says a landmark settlement by the National Association of

Realtors last year changed that for many agents. Now buyers need to directly negotiate with their agents to figure out how much they're going to be paid. And so buyers need to sign agreements specifying that how much those agents will be paid and they need to have a little back-and-forth negotiate with those agents ahead of time before they even start touring homes with agents. In the past sellers just dealt with all of this. Now the buyers have to get involved. For those affected, the changes mean that home sellers will no longer have to offer upfront to cover the cost of the buyer's agent. Buyers will now negotiate directly with the representatives about those fees.

So how does it work? Just because the buyer has to negotiate with their agent about their commission rate, it doesn't necessarily mean they're going to be paying out of pocket for that commission. It's sort of just laying the ground rules before. And then once you enter an agreement with the seller, it's like the seller is also aware of how much the agent is getting. Exactly. Before this settlement, this would happen like, you know, once you kind of already were discussing with the with the agent and

everything but now before those conversations happen the buyer now comes to the agent and they're like hey what do you want to be paid and then we'll go out and find the place right right before you even tour the house exactly before you even tour the house yeah before you even step foot in a house which is a big deal because if you even go to an open house, some agents are making you sign things, which I think is coming under some fire. But yeah, in general, you need to have some sort of contract with them before you start touring around.

And that's tricky though, because many buyers, they'll tour multiple homes and the home that they decide on buying may not be the home that their agent showed them. Maybe some other agent knew about this listing, but the way these agreements are structured, say I sign with you for 30 days, but I find there's a home that I wanna buy with another agent, that agent's only aware of that home, and I go ahead and put an offer in,

I could still owe the first person a commission if I'm still under contract with them. So it can get really messy. And some people, there could be lawsuits and people owing agents money and being surprised by that. So just be really careful with what you sign, because some of these touring agreements, these initial agreements with agents are very confusing. Ultimately, the new rules mean that buyers have to do a little more research on the front end before you go shopping around for a home. And so getting a sense of what real estate agent you want to work with before you are in a rush to buy that specific house can help you out down the road. We've got links to more information about this and everything else we talked about in

our show notes. So go check those out. Buying a property is an investment. And like we mentioned earlier, it's also a personal milestone. One that some prospective buyers can't keep putting off. So what if this is your year? And no matter the market, you need to buy a home? Next week, we'll cover the steps you can take to get ready for a move this year,

whether as a buyer or a seller. What's in your control? What's not? And how can you factor in any surprises you might run into along the way? We'll hear from a money coach, a realtor and a homeowner who recently just sealed the deal about how she did it. I really just wanted to lock something in so we could just, you know, move forward. That's it for part one of our series, Buying a Home in 2025, Navigating the Crunch. Episode two drops next Sunday, but we'll be back tomorrow with a new episode of Your Money Briefing. I'm your host, Arianna Aspuru.

This episode was produced by me. Sound design by Michael Laval. Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Sinzley are our deputy editors. And Falata Patterson is the Wall Street Journal's head of news audio. Thanks for listening. in their own children and build a legacy beyond their business. Tune in each month to the Road to Why podcast by the Northern Trust Institute, where host Eric Schapea dives deeper with leading entrepreneurs on these topics and more. Find the Road to Why where you listen to your favorite podcasts.