Why 2025 may be the right time to buy—and how to prepare

Rising home prices. High mortgage rates. Low inventory. For years, these were the three walls trapping homebuyers. But in 2025, the housing market is finally showing signs of change—and not just seasonally. For the first time in nearly a decade, buyers may begin to see the scales tip in their favor. That doesn’t mean it’s time to rush in blindly. A more “buyer-friendly” market doesn’t guarantee affordability. It does, however, give you room to negotiate, think, and plan. Here’s how to make the most of this shift—without overextending your finances or expectations.

According to Realtor.com, May 2025 saw a 34% surplus of sellers over buyers, with over 500,000 homes effectively sitting on the sidelines. That’s the largest inventory gap in recent memory—and a marked contrast to the seller-driven frenzy of the past few years. This shift changes the emotional and financial tempo of the housing market. Sellers are staying on the market longer. Price cuts are becoming more common. And perhaps most importantly, buyers are no longer being asked to bid aggressively above listing just to be considered.

But while this dynamic gives you leverage, it doesn’t change your budget. That’s where smart financial planning comes in.

Step 1: Know Your Buying Power—Not Just Your Loan Size

The first step isn’t searching on Zillow. It’s clarifying what you can actually afford—not just what the bank approves.

Let’s say your lender offers you a pre-approval for a $600,000 home. That doesn’t mean it’s wise to shop up to that ceiling. The goal is sustainability, not maximum stretch.

Use a 28/36 rule as a planning anchor:

• No more than 28% of your gross income should go toward housing costs (mortgage, taxes, insurance).
• Total debt—including student loans, car payments, and credit card bills—should stay under 36% of your gross income.

This framework protects your liquidity in case rates rise further or your income fluctuates.

Step 2: Understand the Market Indicators, Not Just the Headlines

You may see headlines saying “inventory is rising” or “we’re nearing a buyer’s market.” But national data often masks local realities.

Here’s what to track at your neighborhood or metro level:

• Months of supply: This measures how long it would take to sell all current listings. A buyer’s market typically starts at 6 months. As of May, the US average was 4.4 months—meaning we’re in a transition, not full reversal.
• Median days on market: If homes are lingering longer, that’s a sign of less competition.
• Price reductions: A rising share of listings with cuts (24% as of March 2025) means negotiation is back on the table.

Check your local housing authority or Realtor board for granular data. Don’t rely solely on national trends.

Step 3: Rethink Your Timeline and Tradeoffs

If 2020–2023 was about FOMO-driven bidding wars, 2025 is about clarity and pacing. You no longer need to decide on a house in 24 hours. But you still need to be ready to move when the right one comes along.

Ask yourself:

• How long do I plan to stay in this home? A 5-year horizon helps protect against short-term price swings.
• What tradeoffs am I willing to make? More space might mean a longer commute. A lower price might require renovation.

This is where a “needs vs. wants” exercise pays off. If your financial runway is stable, you can afford to compromise on features—not fundamentals like safety, commute, or school zones.

Step 4: Plan for Upfront and Ongoing Costs

Buying in a buyer-friendlier market still requires preparation. Here’s what you’ll need upfront:

• Down payment: 20% is ideal to avoid private mortgage insurance (PMI), but some lenders offer 10% or lower with tradeoffs.
• Closing costs: Expect 3–5% of the home price for fees, taxes, and inspections.
• Emergency fund: Keep 3–6 months of expenses aside even after purchase. Owning a home means unpredictable repairs.

And monthly costs aren’t limited to your mortgage. Budget for:

• Property taxes
• Homeowner’s insurance
• Maintenance (1% of home value per year is a good estimate)
• Utilities and HOA fees (if applicable)

Use these to model a post-purchase cash flow. Your lifestyle shouldn’t shrink to fit your mortgage.

Step 5: Use Your Leverage Wisely—But Don’t Wait for Perfection

Sellers are softening, but not desperate. They may entertain offers below list or contribute toward closing costs. But they still expect buyers to be qualified and realistic.

Use your leverage to:

• Negotiate price reductions—especially for homes on the market for 30+ days.
• Request repairs or concessions after inspection.
• Ask for seller-paid points to buy down your mortgage rate.

But don’t mistake this for a buyer’s market free-for-all. If you delay too long chasing the “perfect” deal, you may miss windows of opportunity—especially if rates fall and demand rises again.

Let’s simplify this into a few key questions:

1. Can I afford this home with room to spare?
2. Am I buying for the right timeline—not just the right price?
3. Does this purchase strengthen or weaken my overall financial plan?
4. What’s my plan if home values stagnate or decline short-term?

A buyer-friendly market gives you room to be thoughtful. Use that room.

2025 might be the most buyer-friendly housing market we’ve seen since 2016—but that doesn’t make it a no-brainer. Elevated rates, inflation, and wage stagnation still complicate affordability. The key is alignment. Don’t chase timing. Build a purchase plan that reflects your income, life goals, and long-term stability. In housing, as in investing, the smartest moves often look boring on the surface—but compound peace of mind over time. You don’t need the perfect deal. You need a well-matched one. Let the market shift work in your favor—but keep your plan steady.