US Housing Market Forecast for 2025: Insights from Zillow
The US housing market is poised for transformation in 2025, and Zillow has issued insightful predictions about the potential changes ahead. Despite lingering challenges such as high mortgage rates, the market is expected to experience a shift towards increased homebuying activity, inventory availability, and evolving buyer preferences. Let’s explore Zillow’s top four predictions for the housing market in the coming year.
1. Rising Home Sales
Zillow anticipates the housing market will progressively become “unstuck,” resulting in a boost in home sales. With an expected modest pace in the rise of home prices at about 2.6%, existing home sales are projected to reach approximately 4.3 million. This is an improvement over the 4 million sales anticipated for the current year.
- Home prices are predicted to increase by 2.6% in 2025.
- Existing home sales are expected to surpass 4.3 million.
Although affordability challenges will persist, buyers may enjoy longer time frames to consider their options, alongside greater leverage in negotiations as more homes enter the market.
2. Volatile Mortgage Rates
Fluctuating mortgage rates are anticipated to characterize the housing market throughout next year. The past year saw notable changes in the 30-year fixed mortgage rate, which dipped before rising near 7% in response to macroeconomic factors like inflation and a sturdy economy. Zillow foresees similar swings in 2025.
- Refinancing activities are expected to peak during rate dips.
- Mortgage rates likely to see significant volatility.
3. Southwest: A Prospective Buyers’ Market
The current buyers’ market is largely concentrated in the Southeast, but Zillow predicts a shift towards the Southwest. This is attributed to increased inventory availability that could make the region more attractive to homebuyers.
- More inventory in the Southwest could lead to it becoming a notable buyers’ market.
- Sellers may find increased competition as buyers have an array of options.
If mortgage rates were to descend beyond expectations, it might dampen the migration to the Southwest, as affordable borrowing costs could strengthen sellers’ positions elsewhere.
4. Popularity of Smaller Homes
Zillow has noted a growing interest in smaller and more affordable living spaces. The prevalence of the term “cozy” in 2024’s Zillow listings suggests a trend toward downsizing, benefiting people seeking manageable and economically feasible homes.
- “Cozy” homes are showing a rising trend in buyer interest.
- Stabilization in small condo values as downtowns recover.
Zillow remarks that while home value appreciation for larger properties is slowing, smaller homes are stabilizing, reflecting changing buyer priorities influenced by remote work trends.
Conclusion
As we anticipate the shifts forecast by Zillow, prospective buyers and sellers should brace themselves for a dynamic housing landscape in 2025. With rising home sales, fluctuating mortgage rates, the emergence of new regional trends, and a focus on smaller homes, adaptability will be key in navigating the evolving real estate market.
Stay informed and ready to act when market conditions align with your real estate goals, and keep an eye on these predictions for the best opportunities in the coming year.
Explore More on: Housing Market, Mortgage Rates, Housing Affordability
Source: https://www.businessinsider.com/housing-market-2025-outlook-buying-a-home-mortgage-rates-zillow-2024-11