Thinking about buying or selling a home this year? Here’s your no-jargon breakdown of what experts are forecasting for the housing market and what it means for your Ann Arbor area home buying and selling decision-making.
1. Interest Rates May Fall, But Not by Much
- Both the Mortgage Bankers Association (MBA) and the National Association of Realtors (NAR) anticipated 30-year mortgage rates to range between 6.1% and 6.8%, and those forecasts have remained largely accurate, with rates hovering in the high 6 percent range.
- While the Federal Reserve held rates steady in its January, March, May, June and July meetings, the average 30-year fixed rate has remained relatively stable in recent weeks, creating a cautiously optimistic market for buyers as borrowing costs show signs of easing.
- As a borrower, it doesn’t make much sense to try to time your rate in this market. Our best advice is to buy when you’re financially ready and can afford the home you want regardless of current interest rates.
- Overall, experts agree rates will not fall significantly in the immediate future and are unlikely to return to the low rates seen during the pandemic. (The Mortgage Reports)
2. No Crash in Sight
- In Ann Arbor, Michigan, despite the chatter, a housing market collapse is unlikely. While some areas of the country are seeing a deepening housing market slowdown and lower prices, in Ann Arbor, demand remains steady and supply, which is rising, is still tight, which means prices will likely remain within a few percent of current values.
- Persistent housing shortage: A significant and chronic shortage of homes across the U.S. continues to support prices. While inventory is increasing, it remains below pre-pandemic levels. This means even with moderated demand, there are not enough houses for sale to cause prices to plummet.
- Steady, resilient demand: Though sales have slowed, consistent demand from millennials reaching their prime homebuying years and the long-term impact of remote work keep the market from falling. Additionally, baby boomers have been slow to move and there is likely a pent up supply of these properties that will eventually hit the market.
- Strong homeowner equity: Unlike in 2008, today’s homeowners have a substantial amount of equity in their homes. This provides a strong buffer against a downturn, as they are less likely to be “underwater” on their mortgages and forced to sell. The low foreclosure rate reflects this strength.
- Tightened lending standards: Regulations have significantly tightened since the lax mortgage lending practices that fueled the 2008 crash. Today’s borrowers are better qualified, and “no-doc” loans are virtually nonexistent, meaning there are fewer risky loans in the market.
- Seller “lock-in” effect: Many existing homeowners locked in historically low mortgage rates in recent years. This discourages them from selling and buying a new home with a much higher rate, which contributes to the low inventory of existing homes for sale.
Political Uncertainty and Consumer Sentiment
Uncertainty around economic policies sinks consumer sentiment. While current economic conditions were little changed, the forward-looking consumer sentiment Index prepared by the University of Michigan plunged a precipitous 18% and has now lost more than 30% since November 2024, said economist Joanne Hsu, director of the University of Michigan’s Surveys of Consumers. (University of Michigan, March 2025).
This decline reflects a clear consensus across all demographic and political affiliations; Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment and inflation.
“Overall, consumers perceive a tremendous amount of uncertainty in the economy—policy uncertainty, market uncertainty, general economic uncertainty, among others,” Hsu said. “The fact that expectations worsened across the board suggests that consumers perceive more downside than upside risk for the foreseeable future; these views will likely dampen consumers’ willingness to spend or make investments.”
Outlook weakens for labor markets and personal finances
Two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009. In addition, consumers are increasingly worried that their income prospects may be worsening as well.
Consumers downgraded their stock market expectations for the third month in a row, reaching its lowest reading since March 2023. These patterns are notable because robust consumer spending over the past few years has been supported by strong labor markets, reliable incomes and booming stock markets.
Interviews reveal that consumers believe all of these supporting factors may be weakening. Even high-income consumers are concerned about their personal finances: only 26% of them expect to be better off financially in a year, down from 42% in August 2024.
Consumers continue to express increasing unease about economic policy developments. About 44% of consumers this month spontaneously mentioned tariffs during interviews, up from 40% in February. This figure includes the 40% of independents who referenced tariffs, showing that these concerns are not limited to Democrats in opposition to Trump.
3. More Homes Available Than Last Year in the Housing Market
- For all Ann Arbor MLS areas inventory is running at nearly a 3 months supply, up 11 percent from a year ago and up 80 percent from the very tight supply of two years ago.
- Rising housing inventory means more choices, less competition, and potentially greater negotiating power, as the market shifts from a seller’s market to a more balanced or buyer’s market. This scenario is driven by high mortgage rates, affordability challenges, and weakened buyer demand, creating a more favorable environment to find a home and secure better prices or concessions.
- Overall inventory is still historically low and high demand areas and price points below $500,000 can still be competitive.
- A “sideways” market with modest adjustments: Most analysts predict a period of relative stagnation, where home prices remain sticky and trade within a narrow band. This is a market that is correcting and rebalancing, not crashing.
- Moderate price growth or slight declines: While a nationwide crash is not expected, prices may slow their appreciation, or even dip slightly in some regions. The tech-focused research firm Zillow, for example, projects a modest national home value decline in 2025.
- Increased inventory, particularly new construction: Higher inventory levels, especially from homebuilders who can offer incentives like rate buy-downs, are giving buyers more options.
- A shift to a more balanced market: After years of favoring sellers, conditions are gradually shifting to give buyers more power. This means less intense competition and more room for price negotiations.
4. What Does This Mean for You?
- If your finances are in good shape (debt-free, emergency fund, solid down payment), this could be an advantageous time to buy — even if costs are still elevated.The market itself shouldn’t dictate your timing—your personal financial readiness should.
- Trustworthy agents are in demand—character matters more than performance stats when choosing a real estate agent.
Final Thought
If you’re financially prepared—and have done your homework—move forward with confidence. The market is stable enough, and refinancing remains an option. But if you’re not yet in a strong financial position, building your foundation first is the smarter move.
