Those looking to buy a home or refinance their mortgage in 2025 should “buckle up,” prepare for a bumpy ride and stay ready to move when conditions are right.
That is the advice from Zillow, the online real estate company, which is predicting that the housing market will pick up steam in 2025, with more homes being sold and only modest value increases in housing as the industry slowly becomes “unstuck.”
Zillow forecasts that home values will grow at the relatively slow pace of 2.6% in 2025, about the same as this year. Existing home sales in 2025 will reach 4.3 million, up from this year’s 4 million and an increase from 2023’s pace of 4.1 million.
Mortgage rates should ease in 2025, but it is expected to be another bumpy ride, just like in 2024. Zillow reports that rates experience plenty of ups and downs, with runs on refinancing occurring during mortgage-rate dips. Unfortunately, affordability issues will continue, but homebuyers should have more properties to choose from and more leverage in negotiations. Those actively looking for homes should be prepared to move fast when mortgage rates fall.
To deal with affordability issues, Zillow predicts that homebuyers will continue to embrace the “cozy” home concept, which means fewer large open floor plans. Instead, more buyers will be looking for smaller overall homes that offer contained spaces that have their own styles and purposes.
“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.”
Buyers’ markets do exist, including in the coveted Sun Belt states. Cities that have seen monthly decreases in home values in October include Austin, Dallas, Atlanta, Tampa and San Antonio.
If mortgage rates fall more than expected, Zillow predicts that it could hurt affordability by inviting an influx of more buyers into the market looking for good deals. This could increase competition for homes and tilt negotiating power back in favor of sellers.
