Zillow is predicting a more active housing market in 2025, but those hoping to buy — or even refinance — should buckle up for a bumpy ride and be ready to move when conditions are right.
“Buying a home in 2024 was surprisingly competitive given how high the affordability hurdle became,” says Skylar Olsen, chief economist for Zillow, in a statement. “More inventory should shake loose in 2025, giving buyers a bit more room to breathe.
”Americans are adapting to sky-high costs by embracing coziness, a term that for so long has been a thinly veiled critique in real estate lingo,” Olsen adds. “Many are also viewing renting as a longer-term lifestyle. A construction boom has eased pressure on rent prices, putting rent affordability on track to improve next year — that is, as long as wages continue to grow.”
Zillow is forecasting that housing market activity will pick up in 2025 – but the big wildcard is mortgage rates, which will remain unpredictable.
Mortgage rates fell in September, briefly bringing the share of affordable listings to a 19-month high. But since then, they have climbed back to nearly 7%, changing the affordability picture for home buyers.
More swings like this are expected in 2025, Zillow says, with refinancing sprints occurring during the dips.
Zillow currently forecasts home prices will increase 2.6% in 2025, a relatively slow pace that is similar to this year’s growth.
For existing home sales, Zillow forecasts 4.3 million in the coming year, up slightly from 4.1 million in 2023 and a projected 4 million in 2024.
While affordability challenges will remain, buyers should expect more homes on the market, meaning more time to consider their options and more leverage in negotiations.
Mortgage rates will fall, then rise, then fall again – buyers should expect plenty of ups and downs throughout the year.
Photo: Breno Assis