Mortgage Rate or Home Prices Holding You Hostage?
Spring 2025 Real Estate Market Update
To my clients, associates, and partners—Spring 2025 is nearly here, and the real estate market is heating up fast. Can a mortgage interest rate or home prices hold you hostage? Let’s take a hard look at the current market and what waiting could really cost you.
The Housing Market: Supply & Demand at Work
Right now, the U.S. is short about 4 million homes, and with only 1 million new homes built each year, that leaves us with a 3 million home shortfall. Less inventory = rising home prices. This isn’t speculation; it’s basic economics. This shortage will continue driving prices up for years to come.
Mortgage Rates: The Psychological Lock-In
Rates peaked at nearly 8% in October 2023 and have since dropped just under 7%. Still, that’s far higher than the mid-2% rates we saw during the pandemic. It's no surprise that 70% of homeowners have mortgage rates under 5%—and many feel trapped, unwilling to trade their low rates for today’s higher ones to get a new home.
Who Are You in This Market?
There are five real estate markets that never stop: those who must downsize, must upsize, must relocate, must deal with death, or divorce. These people don’t have a choice—they have to make a move regardless of market conditions.
However, beyond these must-move groups, I see four major categories of consumers right now:
The Renters – Either not interested in homeownership or believe they can’t afford it.
The Forever Homeowners – Content where they are, only watching rates for potential refinancing.
The Aspiring Buyers – Waiting for home prices or mortgage rates to drop.
The Rate-Locked Homeowners – Want to move but feel they are held hostage by their low-rate mortgage.
If you’re in Group 3 or 4, let’s discuss how waiting could be holding you back and negatively impacting your financial future.
Group 3: The Aspiring Buyers – The True Cost of Waiting
Spring means more buyers entering the market—creating more competition and, once again, driving home prices up. Waiting could cost you more than you think.
Let’s break it down:
Considering a $400,000 home today?
At a conservative 5% appreciation rate, that home will cost $420,000 next year—a $20,000 increase.
To keep up with this increase, you’d need to save $1,666 per month just to match appreciation.
If you wait, you’ll finance the extra $20,000, adding $133/month to your mortgage at a 7% rate.
Over 30 years, that decision could cost you $47,901 more in principal and interest.
Group 4: The Rate-Locked Homeowners – The Hostage Negotiator Approach
Story 1: Jerry’s Debt Dilemma
Jerry bought his home in 2020 for $295,000 at 3.25% interest. Fast forward five years, and his home was worth $402,000—a $107,000 increase in equity. But Jerry had also accumulated $79,000 in credit card debt at 22% interest.
His low mortgage rate was holding him hostage—he refused to refinance at today’s 7.125%. But when we ran the numbers, consolidating his debt saved him $2,451/month and freed him financially.
Story 2: The Bigger Home Dilemma
Meet Jimmy. He wants to upgrade to a bigger home, but his 4.75% mortgage rate is stopping him. He’s thinking about waiting for rates to drop before making a move.
Let’s break it down:
His current home is worth $402,000.
The home he wants is $550,000.
Waiting two years? His dream home will likely appreciate to $606,000.
By waiting, he’s losing $625/month in home appreciation, more than the $551/month extra mortgage cost at today’s rate.
The Big Picture: Where Mortgage Rates Are Heading
Since 1972, mortgage rates have ranged from 18% in the ‘80s to the rock-bottom 2.5% during the pandemic. The 57-year average is 7.375%—meaning today’s rates are historically normal.
When will rates drop?
The Federal Reserve won’t lower the federal funds rate until inflation slows further.
Experts predict rates could settle around 5.5% in the next few years.
When rates drop, buyer demand will surge, driving prices up further.
What Have We Learned So Far?
✔ The U.S. housing shortage will keep home prices rising for years.
✔ Ultra-low mortgage rates (2.5%) are not coming back.
✔ The 7% rate is historically normal and could be a smart long-term move.
✔ Interest rates will decline slowly—not overnight.
✔ When rates drop, demand will skyrocket, pushing home prices even higher.
Home Price and Appreciation – The Other Side of the Coin
Thinking of waiting? Consider home appreciation.
Reach out for your home value appreciation report today! 734-417-2115 | vic@victorbals.com
Final Thoughts: Are You Letting Rates Hold You Hostage?
The real estate market is always moving. Your life is moving forward—shouldn’t your home decisions align with that? Don’t let fear hold you back.
Maybe it’s time to talk to a “hostage negotiator.” Give me a call.
Victor S. Bals
Senior Loan Officer
NMLS# 162273
Schedule a consultation - VIC@VICTORBALS.COM
