T
he housing market has been unpredictable over the past few years, with interest rates plummeting during COVID-19 and then skyrocketing, making it harder for many Americans to buy a home. Recently, the Federal Reserve lowered interest rates again, signaling that inflation is decreasing. This move may bring some relief to potential buyers, but experts warn that mortgage rates won't drop drastically.

    According to Alexei Morgado, a real estate agent and founder of Lexawise, first-time homebuyers are particularly affected by high mortgage rates. "This year, we're fighting mortgage rates around 7%," he said. While there's speculation about a potential rate reduction to 5.5% or 6% in 2025, it's unlikely to be a significant drop.

    Affordability will remain a major obstacle for buyers, especially in urban areas, due to the ongoing housing inventory shortage across the US. This issue drives up home prices regardless of interest rates. Morgado notes that many homeowners are hesitant to sell and take on higher loan costs, while builders struggle to keep up with demand and high construction expenses.

    The lack of inventory will persist as a challenge for buyers and sellers in 2025, keeping prices high even when fewer homes are sold.