Zillow has released their forecast for the 2025 housing market, highlighting potential shifts and opportunities for homebuyers.
The U.S. housing market, as projected by Zillow, is set to experience notable changes by 2025. After a prolonged period of low activity, homebuying is poised to rebound, despite ongoing fluctuations in mortgage rates. The previous year was challenging for homebuyers, characterized by persistently high mortgage rates and steep property prices. However, changes are on the horizon, signaling a potential adjustment in the market post-pandemic.
The National Association of Realtors reported a 2.9% increase in existing home sales in October, marking the first annual rise in three years. Concurrently, Zillow’s Home Value Index showed the average home value reached $359,099, up 2.6% from the previous year. Freddie Mac data indicated a 30-year fixed mortgage rate of 6.84% last week. Skylar Olsen, Zillow’s chief economist, anticipates a more dynamic housing market in 2025, suggesting that prospective buyers and those considering refinancing should stay vigilant for favorable conditions.
One of the critical predictions is a rise in home sales. Zillow foresees the market gradually shaking off its inertia, with home prices increasing at a modest rate. The firm anticipates home prices to grow by 2.6% in 2025, with existing home sales reaching 4.3 million—a climb from the 4 million expected this year. Despite ongoing affordability challenges, buyers may find more homes available, offering them more time and negotiating power.
Mortgage rates are expected to remain volatile next year, according to Zillow. The firm has observed recent shifts in the 30-year fixed mortgage rate, which dropped earlier but almost hit 7% later as the market adjusted to inflation and economic strength. Olsen predicts more fluctuations in 2025, with tactical refinancing expected during rate dips.
The Southwest could turn into a favorable market for buyers, Zillow suggests. Currently, many buyers’ markets are located in the Southeast. However, the Southwest may offer more opportunities next year as inventory becomes more available, drawing homebuyers. This increase in supply might intensify competition among sellers, while buyers benefit from more choices. If mortgage rates decrease unexpectedly, it could hinder buyer movement to the West by increasing demand and shifting the advantage back to sellers.
Zillow also forecasts an ongoing trend in the popularity of smaller homes. The word “cozy” was found more frequently in listings, indicating a potential shift towards downsizing as buyers seek smaller, more affordable homes. This trend is reflected in stabilizing home values for small condos, which had been declining during the rise of remote work.
Zillow’s predictions for 2025 suggest a shifting housing market, offering potential opportunities and challenges depending on mortgage rates and regional dynamics.
Source: BusinessInsider
