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Brighter Days Ahead Lower Mortgage Rates Could Boost Home Sales by End of 2025

After a few years of rising interest rates and sluggish inventory, there's finally good news for homebuyers and sellers: the housing market may be on the rebound. According to Fannie Mae’s May economic outlook, mortgage rates are expected to dip — and with that drop, a boost in home sales is on the horizon.

Mortgage Rates Trending Lower

Fannie Mae economists now project that the 30-year fixed-rate mortgage will end 2025 around 6.4%, a notable revision from earlier predictions of up to 6.8%. This updated forecast represents the lowest expected average rate so far this year, signaling relief for potential buyers struggling with affordability.

The reason for optimism? Lower borrowing costs often encourage more activity in the real estate market — especially from homeowners who've been sitting tight with historically low mortgage rates from previous years.

More Homes May Hit the Market

One of the biggest challenges in today’s market is limited inventory. Many homeowners have hesitated to sell, locked into low interest rates they secured when mortgage rates were closer to 3%. But as rates settle into a more attractive range, experts anticipate more sellers will re-enter the market, helping to ease supply constraints.

“Heightened mortgage rate volatility may present opportunities for would-be homebuyers to take advantage of temporary lows,” said Mark Palim, Chief Economist at Fannie Mae. “We may see stretches where housing activity is boosted by lower rates.”

Sales Forecast: A Gradual Climb

Fannie Mae now forecasts 4.92 million total home sales in 2025, a 3.6% increase over 2024. Of those, approximately 4.24 million are expected to be sales of existing homes — a 4.4% jump from this year’s actual figures and the highest projection for existing home sales in 2025 to date.

Though slightly below March's prediction of 4.95 million, the current outlook still paints a more positive picture for buyers, sellers, and the broader housing economy.

What This Means for You

If you’re considering buying or selling a home in the next 12–18 months, now’s the time to start planning. Lower interest rates could not only save buyers thousands over the life of a loan, but also unlock new inventory that hasn’t been available in recent years.

At The Smith team, we’re here to help you navigate the market — whether you’re looking for your first home, your next investment, or the perfect place to settle down.