It seems that real estate agents have had the upper hand in the housing market for years now, but the rising supply has been gradually increasing the amount of interest buyers have.
That trend will continue in 2025, according to ZillowAnnual housing market forecast. The portal giant projects a “difficult” year to find houses but one that could eventually lead to buyers coming out ahead.
This is especially true in the Southwest. Zillow said buyers’ markets will spread across the region, as long as mortgage rates don’t drop too much and increase loan demand.
“A lot should dissipate in 2025, giving buyers some breathing room,” Zillow chief economist Skylar Olsen said in a statement. “Americans are adapting to higher costs by embracing luxury, a term that has long been a thinly veiled criticism of real estate parlance. “
Zillow expects home price growth of 2.6% through 2025, roughly in line with growth from this year. It also generated sales of 4.3 million existing homes, with some buyers bucking the post-pandemic trend of buying more space in favor of smaller homes.
But mortgage rates are a big wildcard. While i The Federal Reserve previously expected to cut interest rates by 2025, the election of Donald Trump clouds the picture.
This week, Trump proposed 25% tariffs on goods from Mexico and Canada, and an additional 10% tariff on goods from China. Economists broadly view inflation as a recipe for reining in inflation, which could prompt the Fed to halt rate cuts.
Along with the strength of higher mortgage rates, rates may increase input costs for homebuilders and increase affordability issues. Homebuilders also believe Trump’s mass immigration deportation plan could reduce labor supply and make it more expensive. This may have a negative impact on new home sales.
Zillow is the latest company in the real estate space to publish a 2025 housing market forecast — and it’s echoed by others.
HousingWire’s forecast, compiled by Lead Analyst Logan Mohtashami and Study of Altos President Mike Simonsen, generates fewer home sales than Zillow with 4.2 million. The couple expects a 3.5% home price drop — more than Zillow’s — and a 13% property increase.
Fannie Mae as well as Mortgage Bankers Association downgraded their housing market forecasts after Trump’s election cast doubt on the housing cost index. MBA expects existing home sales of 4.3 million, while Fannie Mae projects 4.5 million — a 4% increase over 2024 levels.
Expectations for existing home sales vary. In forecasts analyzed by HousingWire, they range from 4.2 million to 4.9 million.
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