Zillow’s prediction for the housing market in 2025 in one word? Bumpy
It seems like home sellers have had the upper hand in the housing market for years, but rising inventory has steadily increased leverage for buyers.
That trend will continue in 2025, the newspaper said Zillow‘s annual housing market forecast. The portal giant predicts a “bumpy” year for home construction, but one that could ultimately lead to buyers coming out ahead.
This is especially true in the southwest. Zillow said buyer markets will spread across the region, provided mortgage rates don’t fall dramatically and pent-up demand increases.
“More inventory should come unloaded in 2025, giving buyers some breathing room,” Zillow chief economist Skylar Olsen said in a statement. “Americans are adapting to skyrocketing costs by embracing coziness, a term that has long been a thinly veiled criticism in real estate jargon. “
Zillow expects home prices to rise 2.6% through 2025, largely in line with growth from this year. 4.3 million sales of existing homes are also expected, with some buyers reversing the post-pandemic trend of buying for more space by choosing smaller homes.
But mortgage rates are an important wildcard. While the Federal Reserve Although it was previously expected that interest rates would be cut in 2025, the election of Donald Trump clouds the picture.
This week, Trump proposed a 25% tariff on Mexican and Canadian goods, with an additional 10% tariff on goods from China. Economists generally view such high rates as a recipe for a resurgence of inflation, which would likely prompt the Fed to delay rate cuts.
Combined with the potential for higher mortgage rates, the rates would likely increase raw material costs for homebuilders and worsen affordability problems. Homebuilders also believe that Trump’s plan for mass deportation of immigrants would reduce the labor supply and therefore make it more expensive. This can have a negative effect on the sale of new homes.
Zillow is the latest real estate company to release a 2025 housing market forecast — and it’s mirroring others.
from HousingWire forecast, compiled by lead analyst Logan Mohtashami and Alto’s research President Mike Simonsen expects slightly fewer existing home sales than Zillow at 4.2 million. The pair expects a 3.5% increase in home prices – higher than Zillow – and a 13% increase in inventory.
Fannie Mae and the Association of Mortgage Bankers have lowered their housing market forecasts after Trump’s election cast doubt on the direction of mortgage rates. MBA expects sales of 4.3 million existing homes, while Fannie Mae expects growth of 4.5 million – a 4% growth from 2024 levels.
Expectations for the sale of existing homes vary. Among the projections analyzed by HousingWire, they range from 4.2 million to 4.9 million.
