The housing market outlook for 2025 is coming into focus. Zillow and Realtor.com both predict improvements in inventory and slow yet steady price growth, but their slight variations in projections—on mortgage rates, buyer leverage, and home sales—paint a more complex picture.
We’ve broken down the top takeaways from both reports to help you navigate these overlapping trends and nuanced differences. Here’s what you need to know to stay ahead in 2025.
1. Home Prices Will Continue to Rise, But Slowly
Zillow predicts a 2.6% increase in home values in 2025, continuing the pace seen in 2024.
Realtor.com expects a slightly higher 3.7% growth, though this is slower than their 2024 projection of 4%.
Even with these modest growth rates, home prices are still climbing, which means sellers can continue to expect equity gains—an attractive factor for those looking to cash out. For buyers, even slight price increases will contribute to ongoing affordability challenges, especially if combined with elevated mortgage rates.
2. Inventory Will Improve, But Challenges Remain
Zillow forecasts that inventory will loosen further in 2025, giving buyers more options and better negotiating power.
Realtor.com predicts an 11.7% growth in inventory, slightly lower than 2024’s projected 15.2% increase but still a notable improvement compared to past years.
Despite these gains, inventory will remain below pre-2020 levels. However, Realtor.com expects the deficit to drop from 40% in 2023 to 23% in 2025. This means competition may ease, but won’t disappear entirely, especially in competitive markets.
3. Mortgage Rates Will Be a Rollercoaster
Zillow expects significant fluctuations in mortgage rates throughout 2025, creating opportunities for refinancing during dips.
Realtor.com predicts a 6.3% average rate, with a year-end figure of 6.2%. While these rates are slightly lower than 2024, their unpredictability may impact buyer confidence.
The share of mortgages with rates below 6% is also expected to fall to 75% in 2025—down from 84% in 2024 and 89% in 2023. This could ease the lock-in effect that has kept many homeowners in place over the last few years.
4. Mortgage Affordability Will Improve Slightly
Realtor.com forecasts that mortgage payments will increase by less than $5 (0.2%) in 2025. However, mortgage payments as a percentage of income will decline slightly:
- 2023: 30.4%
- 2024: 30.1%
- 2025: 29.2%
This decline will be due to modest income growth and slightly lower rates. Zillow anticipates similar affordability improvements, particularly during rate dips.
Despite this progress, affordability remains a challenge for many buyers, particularly in high-demand markets.
5. Home Sales Will Rise Slightly
According to Zillow’s forecast, existing home sales will reach 4.3 million in 2025—up from 4.1 million in 2023 and a projected 4 million in 2024.
Meanwhile, Realtor.com is forecasting 4.07 million for 2025—up only 1.5% from the 4.01 million in projected sales for 2024.
Of course, mortgage rate changes will heavily influence sales activity. For example, September 2024’s dip to 6.08% led to an 11.6% rise in new listings and a 9.9% increase in sales the following month.
6. Buyer’s Markets Are Expanding
Zillow predicts buyer’s markets will spread to the Southwest in 2025, driven by rising inventory and relatively affordable prices. This trend marks a shift from the strong seller’s market of recent years, giving buyers more negotiating leverage.
However, if mortgage rates fall more than expected, buyer competition could reignite, limiting the expansion of buyer-friendly conditions.
7. Trump Administration Policies Could Shake Things Up
Realtor.com identifies potential regulatory changes under the Trump administration as a key wild card for 2025. Plans to open federal land for homebuilding and reduce regulatory costs could boost supply and affordability. However, stricter immigration policies and tariffs may increase construction costs, offsetting these gains.
Fiscal policies, including deficit-funded tax cuts, could also drive inflation, keeping housing costs elevated despite lower mortgage rates.
8. Renters Will Continue to Face Challenges
Realtor.com notes that rental vacancies are climbing, reaching the highest level since the pandemic at 6.9%. This is largely due to a surge in multifamily construction.
Southern markets like Austin, Oklahoma City, and Birmingham are leading the nation in new rental stock, with annual growth projected at 1.5%, compared to—
- West: +1.2%
- Midwest: +0.9%
- Northeast: +0.7%
Zillow adds that this construction boom has led to a record high in rental concessions, such as free weeks of rent or free parking, as property managers compete for tenants.
Despite these trends, the median asking rent is forecasted to fall by only 0.1%, and concession perks are predicted to dwindle by the second half of 2025 as new supply gets absorbed and the market stabilizes. This means affordability challenges will persist in 2025, especially in high-demand markets. Southern metros, with their higher supply growth, will maintain their affordability advantage.
9. Smaller Homes & Pet-Friendly Options Gaining Popularity
Zillow reports a growing trend toward smaller, more affordable homes, with “cozy” appearing in 35% more listings in 2024 compared to 2023. This shift reflects buyer preferences for sustainable and functional living spaces over expansive layouts.
Smaller condos and starter homes are also stabilizing in value, offering entry-level buyers a path to ownership.
Another factor expected to drive up competition among rental property owners is the growing emphasis on pet-friendly accommodations, since 58% of renters now own pets—compared to 46% before the pandemic.
To learn more about what’s ahead in the 2025 housing market, check out BAM’s comprehensive roundup of predictions for the coming year, complete with four must-see charts to use in your conversations with consumers.
