What Bank of America’s 2025 Predictions Mean for Homebuyers

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The housing market’s been a rollercoaster lately, and if you’re thinking about buying a home, you’re probably wondering when things might finally turn in your favor. Bank of America just dropped its 2025 housing predictions, and while there’s reason for cautious optimism, the path forward isn’t exactly straightforward.

More than half of potential buyers think the market’s better than it was a year ago, according to Bank of America’s latest Homebuyer Insights Report . Meanwhile, 75% expect mortgage rates to dip and prices to ease up, but they’re still sitting on the sidelines, waiting for that to happen.

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What’s actually changing

Housing inventory is finally increasing after years of slim pickings. Home price growth is slowing down too, which could mean your dollar might stretch a bit further than it would have last year.

But mortgage rates remain high, thanks to ongoing inflation concerns and economic uncertainty. That’s keeping many buyers in wait-and-see mode, especially younger folks who’d likely jump into the market if rates dropped below 6%.

Matt Vernon, Bank of America’s Head of Consumer Lending, puts it this way:

“The uncertainty among homebuyers is real, but so is their resilience. Buyers are navigating a complex environment with rising costs, fluctuating rates, and mixed signals, but many are still planning ahead.”

Reality check for first-time buyers

If you’re trying to buy your first home, you’re facing a particularly tough climb. The average first-time buyer is now 38 years old. Rising prices and fierce competition have pushed younger buyers to make compromises.

According to Bank of America’s report, over 90% of Gen Z and Millennial buyers ended up purchasing homes outside their ideal neighborhoods. And about 30% of Gen Z buyers had to pick up a second job to save for their down payment.

So what should you do? Start by getting realistic about your expectations. That dream home in your perfect neighborhood might need to wait. Instead, focus on finding something you can afford that gets you into the market. Consider these moves:

• Look at neighborhoods you hadn’t previously considered, especially those farther from city centers
• Research first-time buyer programs in your area that offer down payment assistance or better rates
• Consider a starter home you can improve over time rather than waiting for the perfect property

Current homeowners face their own dilemma

If you already own a home, you’re sitting pretty compared to buyers, but you may have decisions to make. If you sell, you could get a decent price with inventory still relatively tight. But you’d also have to buy in the same challenging market, likely at a higher mortgage rate than you currently have.

The smart play might be staying put for now, especially if you’ve locked in a great mortgage rate. If you must move, consider:

• Renting out your current home instead of selling, if the numbers work
• Looking into home equity loans for renovations instead of moving
• Timing your sale and purchase carefully to minimize the gap between transactions

Strategic waiting vs. taking action

You’re in good company if you’re waiting. But while holding out for perfect conditions, you’re missing out on building equity and prices might continue climbing, even if more slowly.

The question isn’t whether conditions will improve. Bank of America’s data suggests they likely will. It’s whether the improvements will be dramatic enough to offset the opportunity cost of waiting.

Consider jumping in now if:

• You’ve found a home you can comfortably afford with today’s rates
• You plan to stay put for at least 5-7 years
• You’ve got stable income and a solid emergency fund

Keep waiting if:

• Current monthly payments would stretch your budget too thin
• Your job situation feels uncertain
• You’re close to improving your credit score significantly

Strengthen your position now

Whether you’re buying soon or later, use this time wisely. Even small improvements to your financial profile can save you thousands over the life of a loan.

Start with your credit score. A 20-point bump could help lower your rate. Pay down credit cards, avoid new debt and check your credit report for errors.

Boost your down payment savings any way you can. Pick up freelance work, sell stuff you don’t need or temporarily cut back on discretionary spending. Every extra percent you put down reduces your monthly payment and might help you avoid private mortgage insurance.

Get pre-approved now, even if you’re not ready to buy. You’ll get a realistic picture of what you can afford and show sellers you’re serious when you do make an offer. Plus, you’ll know exactly what documentation you need, saving time later.

Vernon notes that despite the challenges, “younger generations still understand the long-term value owning a home offers them, and many are doing what it takes to get there.”

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Your next move

The housing market rarely offers perfect conditions. Interest rates fluctuate, prices shift and inventory levels change. What matters is making the best decision for your specific situation with the information available today.

Bank of America’s findings suggest we’re moving toward a healthier market, even if progress feels slow. More inventory and slowing price growth are steps in the right direction. But with mortgage rates likely staying elevated longer than anyone hoped, buyers need strategies beyond just waiting for rates to drop.

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