According to Zillow’s most recent market research, the erratic and abrupt changes in mortgage rates that had a significant impact on the housing market in 2024 will undoubtedly be a significant factor in the upcoming year.
According to Zillow’s estimate, a prediction of gradually falling mortgage rates in 2025 portends modest growth in both sales and home price appreciation. The second half of this year’s home sales was boosted by a September decline in interest rates; Zillow projects 4.06 million sales in 2024. By 2025, that figure ought to increase somewhat to 4.16 million. In 2025, home prices are expected to increase by 2.2%, which is exactly in line with the 2.3% yearly growth that was noted in November.
“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.”
The need for buyers to be prepared to relocate when the time comes is further reinforced by recent and erratic decreases in mortgage rates. Many indicators of the housing market are heading closer to historical averages following the ups and downs of the previous five years. Although the number of new listings entering the market is still about 14% less than it was prior to the epidemic, this represents a significant improvement over the 25% shortfall in March.
In similar fashion, total for-sale inventory is struggling to escape a deep hole that formed early in the pandemic. This is the smallest deficit since September 2020, and it is currently roughly 26% below the 2018–2019 normal. Next year should see more improvements in each of these, but once more, rate developments will have a significant impact on progress.
In an increasingly buyer-friendly market, those who shop for homes during the slower winter months might be able to score a bargain. From October to November, Zillow’s market heat index reveals competition for cooled houses across the country and in 36 of the 50 largest U.S. metro regions.
| Metro Area* | Zillow Home Value Index (ZHVI) | ZHVI Change, Year over Year (YoY) | Share of Listings Sold Over Asking Price (October) | Inventory Change Since Before the Pandemic | New Listings Change Since Before the Pandemic | Median Days to Pending |
| U.S. | $358,761 | 2.3 % | 27.8 % | -26.3 % | -13.5 % | 28 |
| New York | $680,934 | 7.0 % | 51.3 % | -54.6 % | -35.4 % | 32 |
| Los Angeles | $956,130 | 4.5 % | 44.1 % | -27.7 % | -27.0 % | 24 |
| Chicago | $323,596 | 5.0 % | 34.7 % | -47.7 % | -10.1 % | 19 |
| Dallas | $368,995 | -0.5 % | 16.8 % | -1.3 % | -12.3 % | 36 |
| Houston | $306,412 | 0.4 % | 14.8 % | -3.0 % | -3.2 % | 39 |
| Washington | $570,857 | 4.1 % | 40.7 % | -39.4 % | -18.0 % | 16 |
| Philadelphia | $364,488 | 4.5 % | 39.9 % | -44.2 % | -12.7 % | 14 |
| Miami | $485,481 | 1.4 % | 8.9 % | -7.4 % | -8.4 % | 53 |
| Atlanta | $379,029 | 0.6 % | 19.3 % | -5.8 % | -20.4 % | 42 |
There is less rivalry in the market, even if consumers now have less options than they will probably have in the spring. According to the most recent data available, the percentage of residences that sold for more than list price fell below 28% in October, extending a declining trend that started in July.
With a higher likelihood of purchasing a property subject to inspections or repairs and a lower likelihood of being sucked into a bidding war, buyers now should find it simpler to negotiate from a position of safety than they did during the spring rush.
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