The housing market in 2025 remains in a state of cautious anticipation, heavily influenced by mortgage rates and economic uncertainties. With the Federal Reserve opting to keep interest rates steady at its May 2025 meeting due to factors like tariffs, prospective homebuyers and sellers are closely monitoring the market for signs of change. A recent Realtor.com® consumer survey sheds light on current sentiments, revealing that high mortgage rates and the “lock-in effect” continue to shape real estate decisions.
The Impact of Interest Rates on Homebuyers
According to Realtor.com’s survey, 69% of Americans have no plans to engage in a real estate transaction within the next six months, with 63% explicitly stating they are waiting for mortgage rates to drop below 5% before considering a purchase. Additionally, 37% of respondents cited current mortgage rates as a deterrent to buying a home. This hesitation is particularly pronounced among younger generations, with 55% of Gen Z and 47% of millennials delaying purchases due to high rates. In contrast, only 18% of baby boomers reported being deterred by mortgage rates, highlighting generational differences in market behavior.
Despite this caution, there are signs of shifting intent among younger buyers. Notably, 23% of millennial respondents now plan to buy a home within the next six months, up from 15% in September 2024. This increase suggests that while mortgage rates remain a significant barrier, some prospective buyers are beginning to adapt to the current environment.
Laura Eddy, vice president of research and insights at Realtor.com, emphasized the critical role of mortgage rates: “Even though we found a change in millennial homebuying intent, the influence of mortgage rates cannot be overstated, with the vast majority of Americans, including millennials, prioritizing lower rates before committing to a purchase.”
The Lock-In Effect From Interest Rates: A Barrier for Sellers
The “lock-in effect” continues to stifle market activity, particularly among homeowners who secured lower mortgage rates in previous years. These homeowners are reluctant to sell and buy at today’s higher rates, effectively locking them into their current homes. According to an April 2025 Realtor.com seller survey, 61% of potential sellers have been contemplating selling for over a year, with 55% feeling “locked in” by high rates.
This effect is compounded by affordability challenges. Hannah Jones, senior research analyst at Realtor.com, noted, “Mortgage rates on top of an insufficient supply of budget-friendly homes complicates the affordability picture for many homeowners, especially first-time homebuyers who do not have equity from their existing home to help offset mortgage rates.”
Seller Expectations and Market Dynamics
Sellers are also navigating a complex landscape shaped by interest rate expectations. The April survey found that 78% of prospective sellers anticipate interest rates will either remain stable or rise over the next 12 months. Of these, 43% say this expectation makes them more likely to sell, while 20% feel less inclined. Interestingly, 69% of sellers who expect rates to decrease are more motivated to list their homes, underscoring how interest rate trends directly influence seller behavior.
Summary
Despite the current challenges, there is optimism for a gradual shift. Jones predicts that the lock-in effect may ease as homeowners grow weary of waiting for significant rate drops. Life events—such as job changes, growing families, or retirement—may also prompt more buyers and sellers to act, regardless of rates. Improving consumer confidence, as noted in recent reports, could further support this trend.
For now, the housing market remains in a holding pattern, with buyers and sellers alike waiting for more favorable conditions, particularly mortgage rates below 5%. As economic uncertainties persist and the supply of affordable homes remains limited, the decisions of both groups will continue to shape the trajectory of the real estate market in 2025.
Are you thinking about buying or selling real estate in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today. Also, don’t forget to download the free Florida Home Search App for your smartphone or tablet.
