We are in the thick of summer and the “hot” time of year for home buying and selling. Many of our clients are checking in with us to ask, “Are we going to see interest rates trend down? Is demand increasing and the market changing to a buyer’s market?” So, we’ve wrapped up all of those common questions and provided our insights and thoughts for you below.

What’s the overall analysis?

According to Realtor.com‡, total inventory of homes remains 16% lower than pre-pandemic numbers, and nearly half of home buyers struggle to find what they want in a home; however, UMB projects we are entering a buyer’s market as price reductions are happening across the market and inventory is slowly starting to increase. We are starting to see sellers become creative with their listings to sell them.

Prices are not coming down quickly in any area of the economy, from housing to everyday grocery items. Things are expensive right now; however, inflation is slowly coming down.

Overall, we believe the market is shifting to a buyer’s market across many of our regional footprints.

What’s going to happen with interest rates?

Interest rates continue to be historically in a good place, but, to many, they seem elevated since we had historical lows after The Great Recession. With the turmoil in the economy so far this year, it is hard to predict what the Federal Reserve will do with interest rates. In April, the UMB Economists predicted the Federal Reserve has a very tough decision – rising inflation will make it very difficult for them to cut rates, but they are under extreme pressure to cut rates and save the economy.

So far this year, the Federal Reserve has not lowered interest rates, but we never know what’s happening behind closed doors. Only time will tell if rates are lowered this year or not, but either way, consumers should not expect rates to drop as low as they were after the pandemic.

I am looking to buy a home this year. Is that a good decision?

Even in the uncertainty of the market, it is still a good time to purchase a home. Interest rates should not be a big deterrent because you can refinance your mortgage if rates decrease; keep in mind there is a cost associated with this. If you are a first-time home buyer, there are many different programs available to support you. Purchasing a home is still seen as a sound financial decision, as you can build equity over time. According to Bankrate‡, the average mortgage holder gained $5,700 in equity between Q3 2023 and Q3 2024.

It is important to be mindful of the growing insurance costs of homeownership. Your insurance costs should be factored into the cost of your monthly mortgage payment. On average, NerdWallet‡ estimates homeowners pay about $176 a month, or $2,110 a year, for insurance. For many states, natural disasters are making homes difficult to insure. It is important to discuss your options with your realtor and loan officer to make sure your new home would be covered and to fully understand the costs associated with insuring it.

We recommend that any potential buyer get an insurance quote up front—and do it earlier in the process than normal to understand the total cost and to avoid last-minute, unwelcome surprises. For example, we have seen insurers refuse to cover a house unless it has a new roof. Overall, we are advising more focus on insurance as early as possible.

In the same vein, we are also recommending that clients pay attention to moving costs as part of the overall homebuying experience and not only to expect it, but to prepare for it. On average, the cost to hire professionals to move a three-bedroom home locally is around $2,119 according to MoveBuddha‡. On the flip side, if you are planning a long-distance move, the average costs could be around $4,017 according to U.S. News and World Report‡.

Are there different costs associated with building a home?

There is some uncertainty in the market given the changing dynamics and impacts of tariffs. This is something you should discuss with your homebuilder to see how the cost of materials might be impacted by tariffs. Because tariffs continue to be a moving target, if you want to build a home, now is still a good time to explore the option before prices increase. Keep in mind, there shouldn’t be a tariff impact on the resale of homes if you would rather pursue that option. Many new-build neighborhoods might have spec homes — meaning homes that are already built but still brand new — that they need to sell, which means you could get a good deal on the home.

Are there any unique spots in the market for buyers to know about?

When it comes to new builds in places like Phoenix and Dallas, we’re seeing a lower price point for those homes. In a market like Kansas City, there is a much larger price gap between an existing home and a new home.

In all our markets, there was a thought that higher rates may depress home values, but that hasn’t been the case. Specifically in Denver, first time home buyers looking for that starter single-family home are having a really difficult time because prices are just not softening. With the growth we are seeing in Dallas, home prices are exceeding the Midwest.

These are all reasons to work with a professional in your area that is going to know the specifics of that market and can work with your needs to find the right fit.

Top takeaway

Overall, one thing that doesn’t change is the need for a trusting advocate in your corner when navigating the real estate market. Ensure you are working with a team—from realtor and financial institution to insurance provider—you trust who can easily explain the complexities of a home purchase to you. The real estate market will continue to ebb and flow, so it is important to work with people who can help you weather the storm.

UMB personal banking solutions offer convenience and simplicity to meet all your financial needs. From home loans to auto financing and everything in between, see how UMB personal banking can work with you to find the right products for your life and lifestyle.

Navigate the homebuying process and learn about the benefits of owning a home through the Owning a Home playlist on the UMB Financial Education Center. Use our mortgage calculator to see the impact of these variables along with an amortization schedule.

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