Zillow predicts more buyers will come out ahead in a bumpy 2025
Rhea-AI Summary
Zillow forecasts a more active housing market in 2025, predicting 2.6% home value growth and 4.3 million existing home sales. While mortgage rates are expected to ease, their unpredictability will continue to impact buyer decisions. The market is projected to become more buyer-friendly, particularly in the Southwest, with increased inventory providing more negotiating power. Home buyers are embracing smaller, 'cozier' spaces as an affordable alternative. In the rental market, the historic multifamily construction boom is expected to slow down in the second half of 2025, potentially reducing rent concessions. Property managers are adapting to an older renter demographic (median age 42) with increasing pet ownership (58% of renters).
Positive
- Forecasted increase in existing home sales to 4.3 million in 2025 from 4.1 million in 2023
- Expected expansion of buyers markets providing better negotiating power
- Predicted increase in available housing inventory
Negative
- Modest 2.6% home value growth forecast, indicating slow market appreciation
- Continued mortgage rate volatility creating market uncertainty
- Expected reduction in rent concessions in second half of 2025
News Market Reaction
On the day this news was published, ZG gained 0.73%, reflecting a mild positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
Unpredictable mortgage rates will play a big role in shaping next year's housing market
- The housing market is expected to slowly become unstuck, but mortgage rates could be a spoilsport, with their unpredictability expected to make planning for a home purchase a challenge.
- Buyers markets will spread to the Southwest unless rates fall dramatically.
- As the biggest multifamily construction boom in 50 years fizzles out, Zillow predicts fewer rent concessions in the second half of 2025.
"Buying a home in 2024 was surprisingly competitive given how high the affordability hurdle became. More inventory should shake loose in 2025, giving buyers a bit more room to breathe," said Skylar Olsen, Zillow chief economist. "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. 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."
Housing market activity will pick up
Expect to see more sales and only modest home value growth in 2025 as the market slowly becomes unstuck.
Zillow forecasts
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)
Signs point to mortgage rates easing in 0225, but as we saw in 2024, mortgage rates rarely follow the expected path. What is more certain is that buyers should expect plenty of ups and downs throughout the year.
Mortgage rates fell in September, briefly bringing the share of affordable listings to a 19-month high. They have since climbed back to nearly
Home buyers should stay ready to move forward when the time is right. Zillow Home Loans' BuyAbilitySM tool can help by giving buyers a personalized estimate of the home price and monthly payment that fits within their budget at any given moment (based on current mortgage rates), and showing them homes they can afford.
Buyers markets will spread to the Southwest
Currently, 13 major metro areas are buyers markets — where buyers have the upper hand in negotiations, according to Zillow's market heat index — with most of those in the Southeast. Zillow predicts buyers markets will spread to the Southwest in 2025 as inventory continues to come unstuck in relatively affordable markets.
Sellers will feel the heat of competition as buyers will have more homes to choose from. It will be more important than in recent years to work with a great agent to help price and market a home listing well. Tools like Zillow Showcase, an immersive listing experience, can help drive more page views, saves and shares from buyers searching for homes with those attributes, compared to similar neighboring non-Showcase listings on Zillow.2
If mortgage rates fall more than expected, that dims the prospect that buyers markets will spread west. It is anticipated that a significant mortgage rate dip would bring more buyers than sellers back to the market, increasing competition and tilting negotiating power in favor of sellers.
Americans embrace small-home living
The pandemic-era need for more and more space is over. Home buyers will increasingly lean into smaller homes as a more sustainable, affordable and desirable way to live.
The term "cozy" is appearing in more listing descriptions —
Last call for rent concessions
Apartment renters enjoyed a relatively friendly market this year, at least compared to the record rent growth seen in 2022. Rent growth has held steady at a reasonable pace, and the share of rental listings on Zillow offering a concession — such as free weeks of rent or free parking — is at a record high. Zillow expects renters will not have as much opportunity to negotiate for that free month of rent by the end of next year.
The multifamily-construction boom is the primary reason for the rise in concessions. More multifamily units are hitting the market than at any time in the past 50 years, pushing property managers to compete for renters. Those fireworks are predicted to fizzle in 2025, especially in the second half of the year.
Pet-friendliness will become nonnegotiable for property managers
Renters are getting older, and they are not putting off "adulting" milestones such as moving in together or getting a pet before they buy a home. The median age of a renter has risen to 42, and they are settling into the renter lifestyle — fewer renters considered buying this year, which is understandable given conditions that make renting the more affordable option in many markets.
With
About Zillow Group
Zillow Group, Inc. (Nasdaq: Z and ZG) is reimagining real estate to make home a reality for more and more people. As the most visited real estate website in
Zillow Group's affiliates, subsidiaries and brands include Zillow®, Zillow Premier Agent®, Zillow Home Loans℠, Zillow Rentals®, Trulia®, Out East®, StreetEasy®, HotPads®, ShowingTime+℠, Spruce®, and Follow Up Boss®.
All marks herein are owned by MFTB Holdco, Inc., a Zillow affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). © 2024 MFTB Holdco, Inc., a Zillow affiliate.
1 Source: Freddie Mac Primary Mortgage Market Survey, November 21, 2024 |
2 Claim is based on the data available here: https://showingtimeplus.com/showcase-facts |
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SOURCE Zillow
FAQ
What is Zillow's (ZG) home value growth forecast for 2025?
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What changes does Zillow (ZG) predict for the rental market in 2025?
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