US housing market predicted to slow down in latter half of 2025

Zillow’s latest forecast anticipates a 1.4% decrease in home values for 2025, aligning with the prediction from the previous month. This shift comes as more sellers re-enter the market, granting buyers greater leverage in negotiations.

Despite the dip in prices, the outlook for existing home sales remains positive, with a modest upturn projected. Zillow estimates 4.14 million sales in 2025, indicating a 1.9% upsurge compared to 2024.

The rental sector is also displaying signs of a slowdown. Projections indicate a 2.8% increase in single-family rents and a meager 1.6% rise in multifamily rents for 2025. These estimates have been adjusted downwards from earlier figures.

Recent construction endeavors have played a role in stabilizing the rental market, leading to an uptick in vacancy rates. This development contributes to a more tempered forecast for rent growth in the upcoming year.

Zillow highlights that persistent high mortgage rates are a key influencer in the housing market’s trajectory. Coupled with apprehensions about a potentially weakening job market, these elevated rates are anticipated to deter some potential buyers despite the uptick in inventory.

Affordability emerges as a major hurdle for many prospective homebuyers, especially those eyeing their first home purchase. The enduring disparity between housing expenses and income levels continues to impede market participation for numerous Americans.

Skylar Olsen, Zillow’s chief economist, underscores the mounting challenges confronting aspiring homebuyers within the current economic landscape. Olsen notes the increasingly unattainable nature of home prices for potential buyers, underscoring dwindling consumer confidence, mounting economic uncertainties, and concerns about household budget sustainability as pivotal factors affecting the consumer housing market.