SEATTLE, PA — Mortgage rate trends will continue to play a significant role in shaping the housing market in 2025, according to Zillow’s latest forecast. The report anticipates modest improvements in home sales, values, and inventory as the market slowly recovers from years of instability.
Zillow projects 4.16 million home sales in 2025, a slight uptick from the 4.06 million expected by the end of 2024. Home values are predicted to grow by 2.2%, closely mirroring the 2.3% annual appreciation seen in November 2024. These modest gains reflect the ongoing impact of fluctuating mortgage rates on buyer behavior and market activity.
“There’s a strong sense of déjà vu on tap for 2025,” said Skylar Olsen, Chief Economist at Zillow. “We are once again expecting mortgage rates to get better gradually, and opportunities for buyers should follow, but be prepared for plenty of bumps on that path. Those shopping this winter have plenty of time to choose and a relatively strong position in negotiations.”
A minor dip in mortgage rates this past September provided some momentum for end-of-year sales in 2024, but the road ahead remains uncertain. Zillow’s analysis underscores the importance of homebuyers staying prepared to act when mortgage rates temporarily decline. Their new BuyAbilitySM tool aims to assist buyers by calculating affordable home budgets based on real-time mortgage rates and individual financial data.
While mortgage rate fluctuations complicate the market, other signs point toward gradual progress. Inventory levels are improving, with new listings now trailing pre-pandemic norms by 14%, compared to a 25% deficit last March. Meanwhile, total for-sale inventory remains 26% below 2018–2019 averages but marks the smallest shortfall since September 2020.
For buyers entering the market during the winter months, the conditions might be the most favorable in years. Zillow’s market heat index shows cooling competition across the country, with 36 of the 50 largest metro areas experiencing less competitive conditions as recently as November.
Sales trends from October also reveal advantages for today’s buyers. The share of homes selling above list price dropped below 28%, reflecting a downward trend since July. Buyers now face less pressure from bidding wars and have more opportunities to negotiate on repairs or inspections.
Although the housing market is still far from pre-pandemic stability, these incremental improvements signal a slow return to historical norms. However, progress in 2025 will remain heavily influenced by unpredictable mortgage rate movements, leaving buyers and sellers alike navigating an uncertain but cautiously optimistic path.
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