US Buyers Set to Benefit in Shifting 2025 Housing Market

With an expected increase in inventory and a prediction of modest home value growth, buyers in 2025 might discover themselves holding a little more negotiation power. However, the market’s unpredictable mortgage rates will keep things dynamic and challenging for both buyers and sellers.

Skylar Olsen, the chief economist at Zillow, mentioned how competitive buying a home was in 2024 due to high affordability hurdles. In 2025, more inventory is expected to become available, offering buyers some breathing room. Zillow forecasts a 2.6% home value growth in 2025, similar to this year’s pace, with around 4.3 million home sales projected, a slight increase from the 4.1 million in 2023. Particularly in the Southwest, Zillow anticipates significant opportunities as more metro areas could transition into buyers’ markets.

As of now, thirteen major metro areas are considered buyers’ markets, mostly in the Southeast. By 2025, this trend is likely to shift westward unless mortgage rates take a sharp turn. Mortgage rates are forecasted to decrease slightly in 2025 but remain unpredictable, with fluctuations expected throughout the year. Buyers are advised to be prepared for refinancing opportunities during rate drops and be ready to act swiftly when conditions align.

According to Zillow, mortgage rates dropped in September temporarily, resulting in a 19-month high share of affordable listings. However, they have since climbed back to nearly 7%, impacting affordability for homebuyers.

It’s noted that as affordability challenges persist, buyers are turning to smaller homes as a practical and appealing choice. The term “cozy” is gaining popularity, with Zillow reporting a 35% increase in its use in listing descriptions from 2023 to 2024. This shift to smaller homes reflects buyers’ desire for sustainable, efficient living spaces with unique styles and purposes.

With renting becoming a more extended lifestyle choice for many, preferences are changing. The median renter age has risen to 42, with 58% of renters now having pets, up from 46% pre-pandemic. Zillow’s research indicates that almost half of renters are dismissing properties that are not pet-friendly, making pet accommodations increasingly crucial for property managers. In today’s competitive rental market, not allowing pets may put property managers at a disadvantage.

Zillow’s housing market predictions paint a picture of a potentially complex yet promising 2025. Buyers may have increased inventory and leverage, but must navigate mortgage rate fluctuations. Sellers will need to focus on strategic pricing and robust marketing efforts, while renters should secure favorable terms swiftly before the market changes. As Olsen expresses it, Americans are adjusting to new ways of managing high costs and uncertain conditions in an ever-evolving market.