Zillow 2025 Housing Forecast: A Slowdown in Home Prices

The housing market in 2025 is set for a shift. Zillow lowered its home value growth forecast to just 0.9%, a significant drop from the previous projection of 2.9%. This revision has sparked discussions among real estate professionals, homebuyers, and investors, as it suggests a cooling market after years of rapid appreciation.

Several factors, including mortgage rates, housing inventory, and economic uncertainty, are influencing this change. But does this mean home prices will stagnate, or could other forces keep the market competitive?

Let’s explore Zillow’s latest forecast and what it means for buyers, sellers, and the broader real estate landscape.

Zillow’s 2025 Housing Market Forecast: A Big Shift in Expectations

Zillow’s February 2025 housing market report introduced a major adjustment in its home price growth projections:

• Home price growth forecast lowered to 0.9%, down from the earlier prediction of 2.9%.
• Existing home sales are expected to reach 4.11 million, reflecting a market that remains active but subdued compared to pre-pandemic years.
• Housing inventory is rising, providing more options for buyers and reducing the rapid price escalation seen in previous years.

This adjustment suggests that while the market is still growing, it’s doing so much slower—a stark contrast to the double-digit annual growth rates seen during the pandemic boom years.

Why Is Zillow Predicting Slower Home Value Growth?

Several key factors are shaping Zillow’s 2025 housing market outlook:

1. Mortgage Rates Are Keeping Buyers Cautious

📉 Mortgage rates remain one of the most significant influences on home price trends.

• Although rates are expected to stabilize, they will likely hover between 6% and 6.5% throughout 2025.
• Higher borrowing costs make home purchases less affordable, reducing buyer demand.
• This decline in demand naturally slows home price appreciation, as fewer buyers compete for available properties.

2. Inventory Is Increasing, Reducing Competition

🏡 More homes are entering the market, which is shifting the balance between supply and demand.

• Early 2025 saw higher-than-expected new listings, prompting Zillow to revise its home price growth downward.
• With more homes available, buyers have more choices, which weakens the urgency to bid aggressively.
• This increased supply is helping cool down price hikes, particularly in previously overheated markets.

3. Economic Uncertainty and Consumer Confidence

📊 A cautious economic outlook is affecting homebuyer behavior.

• Inflation remains a concern, impacting discretionary spending and housing affordability.
• Many potential buyers prefer to wait, hoping for lower interest rates or better financial stability before making a purchase.
• These factors contribute to a slower, more measured housing market rather than the high-demand, fast-moving environment of past years.

How Does Zillow’s Forecast Compare to Other Market Predictions?

While Zillow is taking a conservative stance on home price growth, other real estate analysts have slightly more optimistic projections:

• National Association of Realtors (NAR): Forecasts a 2% increase in home prices and expects 4.5 million existing home sales in 2025.
• J.P. Morgan: Predicts home prices will rise by 3%, citing strong home equity levels and steady demand.
• Ramsey Solutions: Estimates mortgage rates will stabilize at 6.5%, keeping demand moderate but avoiding a housing crash.
• Forbes: Highlights emerging trends like the rise of AI in real estate and the growing build-to-rent market, which could impact long-term home prices.

These variations indicate that while the housing market is slowing, it’s not in decline—it’s simply returning to a more sustainable pace of growth.

Key Housing Market Trends to Watch in 2025

Even as Zillow’s forecast suggests slower growth, several ongoing trends could shape the market’s direction:

✅ Rising Mortgage Rates Impacting Affordability
Higher rates mean higher monthly payments, which could keep some buyers out of the market, lowering competition for homes.

✅ More Homes on the Market
As inventory rises, bidding wars will become less common, giving buyers more leverage.

✅ Regional Differences in Price Growth
Some areas—particularly those with strong job markets and limited new construction—may continue seeing price appreciation, while others cool down.

✅ AI and Tech in Real Estate
Technology is transforming how homes are bought and sold, making the process more efficient and influencing how quickly properties move on the market.

Will 2025 Be a Buyer’s or Seller’s Market?

📉 For Buyers:

• Less price competition means more negotiating power.
• Mortgage rates remain a hurdle, but prices are stabilizing, making it a better long-term investment.
• The increase in listings means more home choices.

📈 For Sellers:

• Expect longer selling times, as buyers take their time weighing options.
• Pricing competitively will be crucial to attracting interest.
• Homes in high-demand areas will still move quickly, but sellers elsewhere may need to adjust expectations.

What Does This Mean for Homebuyers and Sellers?

🔹 If you’re thinking about buying in 2025, this could be an ideal time to purchase before home prices start climbing again in 2026 or beyond. While mortgage rates remain a challenge, the increasing inventory and slower price growth could provide more negotiating power.

🔹 If you’re selling, set realistic pricing expectations. While demand isn’t disappearing, buyers are being more selective. Well-priced homes will sell, but overpriced properties may sit on the market longer.

Final Thoughts: Should You Trust Zillow’s Housing Forecast?

While Zillow’s 0.9% home price growth projection is on the lower end of forecasts, it aligns with broader market trends:

✔️ Mortgage rates are keeping demand in check.
✔️ More homes on the market are reducing competition.
✔️ Buyers and sellers are adapting to a more balanced market.

Although some experts predict slightly higher price growth, most agree that the days of rapid appreciation are over—for now.

🏡 What’s your take on Zillow’s forecast? Will home prices stay steady, or will they surprise us in 2025? Drop your thoughts in the comments!

FAQ: Zillow’s 2025 Housing Market Forecast

1. Why did Zillow lower its 2025 home price growth forecast?

Zillow revised its home price growth forecast down to 0.9% from 2.9% due to several factors:

• Higher mortgage rates (expected to stay between 6%–6.5%), making homes less affordable.
• Rising housing inventory, which increases supply and reduces price pressure.
• Economic uncertainty, causing buyers to be more cautious.

2. Will home prices go down in 2025?

No, but they are expected to grow at a much slower rate. Zillow predicts a 0.9% increase, while other analysts expect 2%–3% growth. The increase in inventory will help stabilize prices but is unlikely to cause a major decline.

3. How do mortgage rates impact home prices?

Mortgage rates determine affordability for buyers. When rates are high (6%–6.5%), monthly payments increase, reducing purchasing power. This slows demand and leads to slower home price growth.

4. Will there be more homes for sale in 2025?

Yes, inventory is rising, with more new listings entering the market. This gives buyers more choices and weakens seller advantage, leading to less competition and slower price growth.

5. Is 2025 a good year to buy a house?

It depends on your financial situation. Pros of buying in 2025:
✅ Slower price growth means less bidding war pressure.
✅ More inventory gives buyers more choices.
Challenges:
❌ Mortgage rates remain high, making affordability a concern.

6. Is 2025 a good time to sell a house?

Selling in 2025 may take longer than in previous years due to increased inventory. Homes in high-demand areas may still sell quickly, but sellers in slower markets should expect more competition and price negotiations.

7. How does Zillow’s forecast compare to other expert predictions?

• Zillow: 0.9% price growth, 4.11 million home sales.
• National Association of Realtors (NAR): 2% price growth, 4.5 million home sales.
• J.P. Morgan: 3% price growth, citing strong home equity and stock market gains.
• Ramsey Solutions: 6.5% mortgage rates, limited inventory, stable demand.

8. Will mortgage rates drop in 2025?

Most experts predict rates will remain between 6%–6.5%, with no significant drop expected. However, if inflation slows down and economic conditions improve, rates could ease slightly in late 2025 or beyond.

9. Which cities or regions will perform best in 2025?

Markets with strong job growth and limited new housing supply will likely remain competitive. Areas with high migration trends (e.g., Florida, Texas, Arizona) could see continued demand, while overheated markets may cool down.

10. Will technology impact real estate in 2025?

Yes! AI, virtual home tours, and online mortgage platforms are making the home-buying process faster and more efficient. Additionally, AI-driven pricing models and smart contracts could reshape how transactions occur.

11. Should I wait until 2026 to buy or sell?

That depends on market conditions and your personal finances. If mortgage rates remain high in 2025 but drop in 2026, waiting could be beneficial for buyers. However, if home prices start increasing again, buying sooner may be the better option.

12. What are the biggest risks to the 2025 housing market?

• Higher-than-expected mortgage rates could further reduce affordability.
• Economic downturns could impact buyer demand.
• Climate-related risks may affect home values in certain areas.
• Government policies and lending regulations could change market dynamics.