Understanding Real Estate Market Trends for Home Buyers

Planning on buying a home in 2025?

If so, you've come to the right place. Today's real estate market can be a bit intimidating. Home prices are up, mortgage rates are around 6-7%, and inventory is just beginning to bounce back.

When you're looking to buy a home, understanding what's going on in the real estate market is critical. After all, it's an investment that will likely be with you for years or even decades to come.

Let's get into it!

Here's what this article covers:

• Why the real estate market is starting to shift in buyers' favor

• Buyer challenges in the current market

• Generational real estate trends

• The smartest strategies for today's real estate market

The Real Estate Market Is Finally Turning In Buyers' Favor

One silver lining of the last few years is that the housing market is loosening up slightly.

Inventory has gone up 28.9% year-over-year as of June 2025. That's 20 months of inventory gains in a row. A wider selection of homes is coming on the market, giving buyers more options.

But there's a catch…

We're still nowhere near pre-pandemic housing supply levels. The market is far healthier now than it was, but it's still quite competitive. If you're not careful, the home buying process can become more challenging.

Partnering with a reputable and experienced moving company can make relocating for your next home purchase easier. After all, the right moving and relocation services can take the stress out of your move, which is already complicated by today's red-hot real estate market.

The Buyer Challenges In The Current Market

The biggest challenge for home buyers in today's real estate market? Affordability.

Buying a home just feels different now. We've witnessed the residential real estate market hit a valuation of $110.8 trillion in 2025. All that growth has pushed home prices higher, even after a brief correction in late 2024.

For reference…

The market has grown by 48.8% since 2019 and is up by 34.6% since 2020, the year we entered the pandemic. To put that in perspective, we typically see 3-5% annual price appreciation. 5 years' worth of appreciation is now crammed into 5 calendar years.

And as you might expect…

The higher the prices, the bigger the down payments buyers have to make.

Saving for a down payment has become the single biggest hurdle for most buyers. Here are the minimum dollar amounts you'll need to have in the bank to buy a median-priced home:

• $26,800 for 3.5% down

• $95,000 for 20% down

Not everyone can just drop tens of thousands of dollars on a down payment.

Mortgage Rates Are Still High

Rates aren't at all-time highs. At around 6-7%, they're down from their mid-2024 peak. But they're still a long way from historic lows. The rates that many current homeowners have? Sub-3%.

This has a particularly interesting dynamic in today's market. A lot of existing homeowners don't want to give up their low rates. They're content to stay put and pass on listing their home. This keeps inventory down and competition fierce.

Who Is Buying Homes Today?

Who's still buying in this inflated market? Who's not? The shifting real estate landscape is creating some dramatic generational trends.

Millennials make up the largest share of today's buyers. The 43% of home buyers are Millennials, despite many of them being priced out of the market.

Millennials are starting to hit their prime earning years now. The reality of homeownership is starting to set in. And it's prompting many of them to finally make the jump.

The issue is…

Homeownership is far from a slam dunk for Millennials. Only 29.7% of Millennial renters can currently afford a home purchase. There's a wide disconnect between buyers' desires and their financial capacity to buy right now.

First-Time Buyers Are Faring The Worst

First-time homebuyers accounted for just 24% of purchases during 2023-2024. That's the lowest share in over 40 years!

The entry barriers for new buyers have never been higher:

• Upsized down payments

• More expensive monthly mortgage payments

• Tighter lending standards

• Lack of affordable homes on the market

First-time buyers are also taking longer to buy than in the past. They're waiting longer to save up for a down payment. They're older on average when they buy their first home.

Regional Differences Are Wide

If there's one real estate lesson we can take from 2025, it's that location matters. Not all markets are created equal.

The Midwest boasts the nation's highest affordability. Homeownership in the Midwest is at 70%, with cities like Detroit, Pittsburgh, and St. Louis becoming the best places for median earners to find a home.

Compare this to markets on the coasts.

In cities like Los Angeles and San Francisco, there's no such thing as median affordability. Median earners in these places would have to make gargantuan down payments just to get a monthly payment into a reasonable range.

Flexibility with location is a huge advantage in today's market.

Smartest Strategies for Buyers in The Current Market

So how do you successfully buy a home in today's market? What strategies are home buyers using to make it work?

Buyers Are Willing To Compromise

The need to purchase a home is forcing many buyers to compromise:

• 29% would buy a smaller home

• 24% would relocate to another state

• 19% would buy farther away from family/friends

• 18% would buy a fixer-upper

Flexibility can give you more options and better odds of landing an affordable home.

Buyers Focus On Factors They Can Control

Mortgage rates, housing prices, and home availability are all factors that home buyers can't control.

You can, however, control:

• Credit score (the higher it is, the better your rate)

• Down payment savings

• Debt-to-income ratio

• Purchase timing

Earn a better rate and increase your buying power by focusing on things like your credit score and your debt-to-income ratio before making a purchase. Get pre-approved for a mortgage so you know exactly what you can afford.

Buyers Are Checking Out Different Property Types

New construction homes come with advantages like builder incentives, which can make ownership more affordable. Builder incentives can take the form of mortgage rate buydowns or other perks.

Don't overlook condos and townhomes either. Smaller homes in cheaper neighborhoods can be a great starter option.

The Real Estate Market Forecast For 2025 And Beyond

What's in store for buyers over the next year or two?

Mortgage rates are projected to remain in the 6-7% range for the next year or two, barring a recession. Some even think they could drop more quickly in late 2025 or early 2026.

Home prices will probably keep rising, albeit at a slower pace than in recent years. It's likely that we've seen the last of double-digit annual appreciation.

Here's one last important piece…

Inventory is finally coming back online. Buyers will have more options as more sellers enter the market. This gives buyers a little more leverage than in the past.

But don't hold out for ideal market conditions before buying. You might be waiting a long time.

Wrapping This Up

Buying a home is hard right now. There's no denying it. The pandemic accelerated so many factors that created affordability challenges for buyers.

Buyers do, however, have one thing on their side: slowly improving inventory. More homes are coming on the market now than at any point in the past couple of years. If you know where to look, there are still good deals to be had.

The key is being strategic in your approach, being patient, and not trying to time the market perfectly. Shift your strategy to account for today's trends, and you'll have a much better chance of finding a home.

Look for ways to strengthen your financial position, take advantage of new construction builder incentives, and expand your horizons. Are you willing to compromise on certain aspects of your search? Those compromises might be the key to getting the home you want.

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Jenny Kakoudakis is a seasoned interiors blogger. She launched the award-winning Seasons in Colour in 2015 and the luxury property and interior decor blog www.alltheprettyhomes.com in 2024 to cover all your interior design, travel and lifestyle inspiration needs.