Post Updated on April 15, 2025 by Taylor.
This blog post has been updated to reflect the current housing market as of April, 2025.
Making a financial decision about your home is one of the biggest and most impactful moves you’ll make in your life. In this blog, we’ll help you weigh your options and decide whether you’re better off buying a new home, refinancing the one you already have, or remodeling your current home—and the best practices for approaching both.
Before we dive in, let’s take a look at the current state of the market.
Buying a Home: The Market is Stabilizing
The first thing to note is that as I’m writing this update, in April 2025, the housing market is starting to stabilize. Now, I’m not a realtor, but it’s clear that we’re seeing inventories get into alignment with supply and demand. We haven’t necessarily transitioned from a seller’s market to a buyer’s market, but houses are starting to sit on the market a little longer. And that’s normal.
Anecdotally, I’m seeing home prices in my area getting cut. So we’re starting to see some of the housing inflation come down. This isn’t to say we’re moving into a deflationary period, but sellers are less zealous than they were two years ago. That’s another indicator that things are normalizing. And that’s good.
Market Behavior Post-COVID: Inventory is Stabilizing
While we aren’t seeing an abundance of inventory, necessarily, there’s definitely more balance between supply and demand than there was two, three, or four years ago during COVID. At that time, interest rates were so low that houses were selling sight-unseen for 15%, 20%, even 30% over their asking price. That’s not happening anymore.
This means that, as a buyer, you don’t have to go see a house the minute it gets listed on the MLS. You can see it, you can let it sit on the market, you can offer, and you can see what the market’s going to take for it. That’s certainly a good thing for buyers.
Mortgage Rates Aren’t Dissuading Buyers, Yet
I want to touch on mortgage rates. We saw a massive run-up, multi-decade high for mortgage rates in recent years, and that has cooled down. I think that’s obviously in alignment with what we saw in 2024, where we started to see the Fed cut rates.
Now, that’s going to directly impact the bond market, which will in turn impact interest rates for mortgages. As of March 2025, the average 30-year fixed mortgage rate is 6.5%, down from the 2023 peak of over 7.5%, according to Freddie Mac. It’s definitely high relative to the last 15 or so years, but it’s not yet eating into the buying power of any potential buyer.
Refinancing: When Does It Make Sense?
A lot of clients are wondering if-and-when refinancing for a lower interest rate makes sense. The first thing we map out for our clients is the cost of that refi.
You’ll want to prepare for closing costs, underwriting costs, and maybe even the cost of an appraisal.
The break-even time depends of course on what your current interest rate is against the new, lower rate you’d qualify for.
For example, let’s say you have a $500,000 house and you’re paying 7.5% interest. If you refinance to a 6.5% rate, you might save just under $300 per month on your mortgage. Now, considering your upfront costs to refinance could be around or above $3,500, it would take you just about a year to break even on your savings vs the cost to refi.
So you’ll want to do some personal calculations to see when it would be best to attempt to refinance. A financial advisor would be an excellent resource for that.
Refinancing Options:
Adjustable Rate Mortgages
Adjustable Rate Mortgages (ARMs) can be really valuable, despite the bad reputation they received in the early 2000s.
Basically, how they work is that you’re locked in at a rate for a certain amount of time—say, 5 years—and after that year, the rate will increase. You’ll hear them referenced as ‘5-in-1’ or ‘6-in-1’ and the 5 and 6 represent the number of years you’re locked in at your original rate. The 1 represents how much your interest rate can increase in a single year.
The gamble with this particular style of loans is that once your year-mark is up, your interest rate adjusts to whatever the current market value would be.
You could be looking at an increase, if the market rate is higher than it was when you bought your home. But you could also be looking at a decrease, if the interest rate happens to drop once your initial rate expires.
So ARMs are definitely an option.
Again, it does give you a little bit more exposure risk to the interest rate environment. They’ve been out of vogue over the last 15 years because rates have been so low, it made sense to lock-in at a fixed rate. But now that rates are shifting a little, it could make sense to consider an ARM.
Fixed Rate Loans
If you’re refinancing or locking in your loan on a new home and you want a fixed mortgage rate, it’s worth considering the length of your loan.
We’ve been looking into this for a lot of our clients recently. Interest rates dip when you shorten your loan duration. So if you can afford a 20 or 10-year loan, as opposed to the more common 30-year loan, you’ll get a more favorable interest rate. In this scenario, cash flow is the major barrier to entry.
Anticipating Rate Changes
There are a lot of unknowns and quite a lot of volatility going on in the political world. Tariffs and the like could impact inflation, which could impact what the Fed does with their rates. The problem is, we don’t know which direction they’re going to swing.
The safest bet is to avoid speculation, or hedging your bets on rate changes. This 6.5% range feels like a new normal. If you have a loan at this rate, it’s a reasonable place to be.
Should You Trade Up or Remodel?
Another thing our clients are questioning is whether to trade up and buy a new home or remodel the one they have. I ran into this with my own family, so I’ll give a little bit of a story there:
In the peak of COVID, we welcomed another child to our family. Suddenly we had three kids in a house that wasn’t structured for it. We were at our breaking point. But, at the time, housing prices were skyrocketing and interest rates were climbing, too.
For my family it wound up being more financially advantageous to spend a lot of money remodeling than it would have been to trade up. We were able to make our space accommodate our needs.
We weren’t the only ones making this choice and the trend continues today. According to a Zillow Consumer Housing Trends Report, 60% of homeowners in 2025 are opting to remodel rather than move.
For clients who are on the fence, I try to get them to name their pain points. Do you need an extra bedroom? Bathroom? Are you just looking for a refresh? If you look at it from this context, you can weigh the costs and benefits of remodeling.
Renovating: Leveraging Home Equity
There’s a bias happening now where if you purchased a home when the interest rate was 3% and now it’s 6.5%, it might not make sense to buy something new only to lock-in the higher rate.
There is a way to leverage the equity in your home by using a Home Equity Line of Credit (HELOC). Equity has been climbing even after the massive jumps during COVID. In the past 12 months, based on CoreLogic’s 2025 Q1 Equity Report, the average homeowner gained $24,000 in equity.
If you’re using equity to remodel, the dollar-for-dollar amount you put into your home should raise your equity even more. This way, you’re not putting yourself at risk of going underwater.
“Going underwater,” of course, means your home value is less than what you owe. If you’re borrowing equity in the house and your home value increases as a result, you’re keeping your equity delta while getting some improvements.
So the main questions to ask before diving into this would be: what improvements are you trying to make? And are they inside a budget you can manage?
Trading Up: Working With a Credible Realtor
Partnering with a credible and experienced real estate professional is really important. Much like a financial advisor, not all realtors are the same. Based on what I’ve witnessed anecdotally, a number of licensed real estate professionals are not actually doing deals.
You’re going to want to make sure you work with someone who is actively closing deals. This shows they’ve got more of a boots-on-the-ground level of expertise. If a realtor isn’t producing, or they’ve stepped away for a while, they aren’t going to have their finger on the pulse of the market.
One way a real estate agent can help you is in considering whether to trade up or remodel. If you’re working with a professional who has your best interest in mind, they’ll act with integrity here. For example, when my wife and I were researching whether buying or remodeling was best for us, our realtor sat down with us and gave us some comps of houses that had the upgrades we wanted. It was so valuable to see where our house might land in the market with our remodels.
And while this didn’t get our realtor to close any deals, he did make me a very loyal client. I know he’s going to be working for me and putting my interests first. So finding the right real estate agent is super important, especially in today’s leaner environment where you can be a little more picky about who you work with.
Home Ownership as Part of Your Greater Financial Plan
When considering home ownership in general, I like to ask my clients to think of it in the context of their bigger financial plans. Because, for most people, a home is one of their biggest assets. On the whole, owning a home is an excellent way to uplevel your portfolio. In fact, a 2024 Merrill/Bank of America wealth survey released a statement that noted, “75% of high-net-worth individuals say real estate decisions have a ‘major’ impact on their overall financial strategy.”
That said, there are some risks involved. If you lose your job or experience a financial upset, of course, you’d be putting yourself at risk of being able to pay the mortgage. That one is pretty well-known. But there are some more hidden risks worth exploring, if you’re considering buying a new home or trading up.
Risk 1: Insurance
This is prominent right now in LA in lieu of the recent fires, but we’ve also seen it in Colorado. A lot of insurance companies are targeting certain areas as more at-risk to insure due to natural disasters and the like. Some insurance companies are outright canceling all new policies. This leaves the homeowner scrambling to find a new one. This is challenging because with fewer companies willing to insure (less supply), the higher the premiums (more demand).
So, if you’re in the market for a new home, it may be worth investigating what kind of zone you’re moving to. Are you at risk of wildfire? We never thought there would be much risk in an urban corridor, but that’s changing. A little research can save you major grief in the long run.
Risk 2: Rising Property Taxes
When we saw the massive run-up in home prices during COVID, we also saw a huge jump in property taxes. Here in Colorado, one of the ways the state creates revenue is through property tax. Every two years, the county assessor will reevaluate the value of your property.
This can be really shocking for homeowners. I’ve talked to clients who had their tax bill jump from $2,000 to $4,000 from one year to the next. That’s a 100% gain. So you need to evaluate your cash flow to ensure your financial plan can accommodate these increases.
Risk 3: Inflation and Maintenance Costs
Like everything else, houses age. They need maintenance. And with recent inflation, we’ve seen maintenance costs go up. Inflation has affected both materials you’re buying for the home, like furniture, as well as labor, like plumbing or contracting.
In the end, we are seeing higher prices for just about everything across the board, whether that’s the maintenance on your home, your taxes, or homeowner’s insurance.
It makes for a more challenging environment, but if you’re on top of your financial plan, you can factor all these risks in.
Don’t Let Decision Paralysis Hold You Back
There’s a lot to consider when looking at investing in a home, especially considering the current environment. But at Four Points Wealth Management, we don’t want these considerations to keep you in paralysis.
We know there is a best way forward for you. And we find it really exciting to walk our clients through the home ownership decision-making process when integrating it into their overall financial portfolios. It is such a huge asset to have and can matter so much to your overall financial well-being.
If you are looking for some guidance around how to get the most out of today’s real estate market, don’t hesitate to reach out. My team and I would be happy to discuss.
Book a free consultation to help you decide whether you should move or remodel.
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