As we approach 2025, Zillow’s latest housing market forecast paints a cautiously optimistic picture for homebuyers and sellers. While affordability challenges persist and mortgage rates remain unpredictable, Zillow predicts increased inventory, modest home value growth, and more opportunities for buyers in specific markets.

For real estate agents, understanding these trends is essential for helping clients navigate a dynamic and shifting market. Here’s what you need to know about Zillow’s 2025 forecast and how to position yourself for success.

• More Homes on the Market: Zillow predicts a rise in housing inventory, providing buyers with more options and negotiating power.

• “Cozy” is In: Listings featuring the word “cozy” increased by 35% in 2024, signaling a trend toward smaller, more affordable homes.

• Buyers’ Markets in the Southwest: Inventory is expected to improve in relatively affordable markets, with buyers’ markets spreading westward.

• Mortgage rates are forecasted to ease slightly in 2025 but will remain volatile, impacting affordability and buyer behavior.

• September 2024 saw rates hit two-year lows following a Federal Reserve rate cut, only to rise again toward the 7% range.

• Zillow predicts home values will grow by 2.5% in 2025, a modest increase compared to past years.

• Markets with affordability and inventory improvements are likely to see the most stable growth.

• Zillow forecasts 4.3 million existing home sales in 2025, up from a projected 4 million in 2024. This marks a slight improvement but remains below historical averages.

• Buyer activity is expected to pick up, but competition will vary significantly depending on regional conditions and mortgage rate fluctuations.

The rise in listings featuring smaller homes signals a shift in buyer priorities:

• Downsizing and Affordability: Highlight cozy, efficient homes to attract buyers seeking affordable options.

• Lifestyle Features: Emphasize proximity to amenities, low maintenance, and energy efficiency in your marketing efforts.

Agents in the Southwest and other relatively affordable markets should prepare for increased buyer interest:

• Leverage local expertise to guide buyers toward neighborhoods offering the best value.

• Position yourself as a resource for out-of-state buyers relocating to these markets.

Volatility in mortgage rates will remain a central factor shaping buyer behavior:

• Work closely with mortgage professionals to educate clients on financing options like rate buydowns or adjustable-rate mortgages (ARMs).

• Encourage buyers to stay ready to act quickly when rates dip or favorable homes hit the market.

With affordability challenges and unpredictable market conditions, buyers and sellers will need informed guidance:

• Help buyers understand how to leverage increased inventory and negotiate effectively.

• Educate sellers on pricing strategies to remain competitive as inventory rises.

1. Expand Your Market Knowledge

   Stay informed about regional trends, inventory shifts, and mortgage rate forecasts to position yourself as a trusted advisor.

2. Adapt Your Marketing

   Focus on the features and property types that resonate with today’s buyers, such as cozy homes and affordability.

3. Build a Network of Experts

   Collaborate with mortgage professionals, inspectors, and contractors to offer clients a seamless homebuying or selling experience.

4. Proactively Engage Clients

   Encourage potential buyers and sellers to stay prepared for market opportunities, even as conditions fluctuate.

Zillow’s 2025 housing market forecast offers a mix of optimism and caution. Increased inventory and modest home value growth are bright spots for buyers, while persistent affordability challenges and volatile mortgage rates require careful navigation.

For real estate agents, this is a chance to showcase your expertise, adapt to shifting trends, and guide clients through an unpredictable market. By staying proactive and informed, you can help your clients achieve their goals and build long-term success in the year ahead.