Spring Housing Outlook: Buyers and Sellers Will Have to Navigate a Shifting Market

With the busiest time of year for homebuying just around the corner, buyers and sellers alike are wondering: Will a spring increase in market activity buck recent trends and jump-start home sales?

The past two seasons have fallen short of expectations, but there are some different dynamics this year that could entice both buyers and sellers to bring a little more life to the market.

The recent increase in the number of homes for sale is one factor that could spur more activity. Although the overall housing supply is still below pre-pandemic levels in many areas, some cities are seeing a significant increase in home listings. According to Realtor.com’s most recent housing trends report, inventory increased by nearly 26% year-over-year in February.

Another positive sign for buyers is mortgage rates. After peaking at 7.04% in mid-January, Freddie Mac’s benchmark rate survey posted seven straight weeks of declines, with current mortgage rates averaging nearly half a percentage point lower.

Since rates aren’t expected to go significantly lower, more buyers are likely to come off the sidelines, according to Tom Hutchens, president of Angel Oak Mortgage Solutions. Buyers and sellers have come to understand that if they want to participate in today’s housing market, they have to adapt to the higher rates characteristic of today’s environment compared to 2020 and 2021, Hutchens adds.

That’s not to say buyers and sellers won’t face challenges in today’s market. Despite the recent decline, there’s no guarantee that mortgage rates won’t reverse course and increase again, as they have over the past two years. Plus, the new administration’s policies and how they impact the economy is “very much … a wild card that I think will continue to impact the rates market,” says Melissa Cohn, regional vice president of William Raveis Mortgage.

Given the old and new challenges facing this year’s housing market, it’s best to be prepared for any outcome. If you’re considering buying or selling this spring, these tips can help you do just that.

Explore housing options

Housing inventory has seen significant improvement this year. According to the National Association of Realtors, there was a three-and-a-half-month supply of existing homes available for sale at the end of February, and that number is expected to continue to improve.

More listings not only provide home buyers with more options but also decrease competition for available properties, helping keep home prices in check. Home sellers have also adjusted to the recent lack of buyer demand: Nearly 17% of homes on the market have had their prices reduced. You may also be able to negotiate seller concessions, such as repairs or home warranties.

There’s also an increasing number of newly-built homes coming onto the market. According to the U.S. Census Bureau, there was a nearly nine-month supply of newly built homes in February. Many builders can offer incentives like rate buydowns and custom upgrades in order to make their properties more attractive.

Work with a knowledgeable agent

If you’ve bought or sold property before, you may feel like you can handle the transaction on your own. You can definitely save money on agent commissions by doing so. Another option, if you’re looking to save money, is using one of the flat-fee brokerages that offer basic services for a one-time fee.

But for many prospective buyers, working with an experienced real estate agent can offer certain advantages. Professional agents have access to market data, such as price and inventory trends in specific neighborhoods, that buyers and sellers do not. They can tell you how long homes are taking to sell, which is an indication of how competitive the area is. The longer that homes stay on the market, the less competitive the area and the more likely a motivated seller will be to negotiate, which a knowledgeable agent also can help you navigate.

These services will come at a price, though. Last spring, one of the market uncertainties facing buyers concerned the legal settlements pertaining to how agents get paid. Many market observers suggested that buyers and sellers could pay less as a result of changes imposed by the terms of those settlements. To date, however, there have been no noticeable changes in how agent commissions are paid. Most sellers are still footing the bill, and the average commission paid is still between 5% and 6% of the purchase price.

Become an educated buyer

“Become hyper-aware of what’s going on in your local market,” Leo Pareja, CEO of eXp Realty, says. “If you read a national headline, it might not apply to you.”

Factors such as how much inventory is available, pricing trends and how quickly homes sell after coming onto the market can indicate whether you’re in a competitive or cooling market. You can be more aggressive in your offer in a market with less competition and homeowners motivated to sell than you can in a market with few available homes and high demand, Pareja says.

Look at your local MLS listings for information on recent trends in home sales. See how long homes stay on the market and if sellers have reduced prices beforehand. This is another area where a knowledgeable agent’s expertise can be useful, since keeping track of local trends is part of their job. They also have access to other data such as withdrawn or expired listings, comparable market analyses and list versus sale price comparisons that can help you make the best homebuying decision.

Think beyond a 30-year fixed mortgage

With higher mortgage rates than homebuyers faced even a few years ago, being an educated buyer includes researching different financing options. While most homebuyers choose a 30-year fixed-rate loan because of its predictable monthly payments and long repayment term, it’s not the only alternative out there.

A 15-year fixed-rate loan, for example, offers a lower interest rate compared to a 30-year mortgage. Although the monthly payments will be higher than if you’d bought the same house with a 30-year loan, you can save substantial amounts of money since the lower rate and shorter duration means you won’t pay as much in interest over time.

For instance, Freddie Mac’s benchmark rate on a 30-year fixed-rate loan has been hovering in the mid-6% range for the past couple of months. The rate on a 15-year fixed-rate mortgage is averaging in the high 5% range — roughly 0.8 percentage points lower. On a $300,000 loan, the shorter term can translate into a savings of $244,000 in interest over 30 years.

Adjustable-rate mortgages (ARMs) also offer a lower initial interest compared to 30-year fixed-rate loans and could be a good option if you don’t plan on staying in the home long-term.

ARMs typically have an introductory fixed rate for a predetermined period — usually five, seven or 10 years. The fixed rate is typically about half a percentage point lower than that of a 30-year loan. Once the fixed-rate period ends, however, the interest rate on an ARM becomes variable and adjusts regularly, typically every six months.

Although there’s always the chance that the adjustable rate will decrease, ARM rates usually increase over time. Most lenders will cap how high adjustable rates can rise, but they can increase to double digits. This means a significantly higher monthly payment if you don’t sell the home or refinance the mortgage.

Loans offered through the Federal Housing Administration, the Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA) tend to have lower credit score requirements, lower rates, and — in the case of VA and USDA loans — usually don’t require down payments.

By learning about different loan types you may qualify for, you can shop around to find the best option that fits your budget and income.

Know your budget

You want to go into a home purchase knowing exactly how much house you can afford.

That means including expenses beyond just your mortgage in your calculations. Even if you have a fixed-rate mortgage, other expenses like property taxes, homeowners' association dues and homeowners insurance can — and probably will — rise. There are other expenses, such as maintenance costs, that you need to consider as well. You need a budget that can be flexible enough to accommodate these variables.

Property taxes

How much tax you pay is based on your home’s assessed market value and is very localized, which means the tax rate varies by zip code within each state.

With the rapid increase in home prices during and after the pandemic, property taxes have increased at a faster-than-usual rate. According to data analytics firm Corelogic, the average property tax bill in the U.S. increased by 27% between 2019 and 2024. Since home prices are forecast to continue increasing, buyers can expect higher tax bills in the future, as well.

If you plan on moving to another county or state, you need to research local property tax rates and be prepared for potentially higher costs. Your real estate agent can provide information on current tax rates in the area, or you can look it up yourself on the Tax Foundation website.

HOA fees

If you plan on buying a condo, co-op, or a home in a planned community, your budget should include a line for HOA fees. In some cases, these fees may also be charged in some residential neighborhoods. The money is used for the upkeep and repair of common areas.

As with property taxes, these fees vary widely by location, ranging from a few hundred dollars to $1,000 or more each month. These fees also can increase on a yearly basis. According to the HOA Member Services website, HOA fees increase by an average of 3% to 5% annually.

Homeowners insurance

One of the biggest costs you need to consider is homeowners insurance. The increasing frequency and severity of weather-related events in recent years have led to rapidly rising insurance costs. Annual premiums have increased by 61% since 2019 and hit a record high in 2024. Costs are likely to keep rising in the coming years, as well.

Not only are premiums higher, but some markets are so high-risk that obtaining an insurance policy for any price can be difficult. Some of the largest insurance companies in the country, such as Farmers, Allstate and State Farm, are limiting their exposure in climate-risky states like California and Florida.

Consider the availability and cost of homeowners insurance in the market where you’re looking to buy. Many multiple listing services will include estimates of a home’s insurance costs, and your real estate agent can provide average costs, as well. If you want a more accurate estimate, you can reach out to the insurance providers servicing that area and ask for a quote.

Maintenance costs

There are also both planned and unexpected upkeep costs to consider, says Tim Hewitt, senior vice president and financial advisor at Wealth Enhancement.

For example, the home may need renovations or upgrades to improve its livability, and you’ll need to pay for regular maintenance and utilities. Keep in mind, Hewitt adds, that if you’re moving from a smaller home into a larger one, your utility bills and maintenance costs will be higher. Unexpected repairs, such as a damaged HVAC system or broken pipe, can also create a financial drain and are items that should be budgeted for.

The most important part of ensuring you’re financially ready to buy is “having those conversations, going through a typical budget, and then saying, are these other costs in addition to your monthly payment… being addressed?” Hewitt says.

While there are signs that this spring could provide better opportunities to buy and sell property than the past two years, there are potential downsides. There are concerns about the strength of the U.S. economy, the potential for higher inflation as a result of new government policies and the possibility of increased global conflicts. All of these factors could cause buyers and sellers to be more cautious about such a large investment, and could also impact the direction of mortgage rates.

“People want to buy in a marketplace where they feel confident about what’s going on,” Cohn says. “I think there’s a tremendous amount of uncertainty [right now].”

More From Money:

8 Best Mortgage Lenders of 2025

The Best Time of Year to List Your House Is Coming Soon

The Typical House Down Payment Is Now Over $63,000