2025 is looking to be an interesting year for the housing market. Zillow’s latest predictions highlight a more active market with lower mortgage rates, more homes for sale, and slower home price growth.
While their analysis gives us some solid insights, I’ve got my own take on what’s ahead—so let’s break it all down in a way that makes sense and (hopefully) takes some of the mystery out of real estate as we quickly approach 2025.
The Housing Market Is Getting “Unstuck”
Zillow expects existing home sales to rise to 4.3 million in 2025, up from 4 million in 2024. Home prices are predicted to grow at a modest 2.6%, meaning prices should stay relatively stable.
What Zillow Says:
More homes will hit the market, giving buyers more options and more time to make decisions. That’s great news for anyone who’s been frustrated by the ultra-tight market of the past few years.
What I Think:
I’m 100% on board with this. The big reason for more inventory? People are starting to move again. For a while, folks stayed put because they didn’t want to give up their rock-bottom mortgage rates. But life happens—jobs change, families grow, and people downsize. More and more homeowners are realizing that 6% mortgage rates aren’t so scary anymore. It’s becoming the “new normal,” and the fear of selling is fading.

Mortgage Rates Will (Mostly) Fall
Zillow predicts mortgage rates will hover around 6% by the end of 2025, with some ups and downs along the way. That’s a big improvement from the 7%+ rates we’ve seen, and it’s enough to make a difference for buyers and sellers.
What Zillow Says:
Mortgage rates will trend downward, but it’s not going to be a straight line. Expect some fluctuation.
What I Think:
I agree that rates are headed down, but I think the drop will be more methodical. The economy is finding its footing, bond rates are stabilizing, and we’re getting more clarity on U.S. policies—these things all help push rates lower. By the end of the year, I see 6% as a sweet spot.
Here’s the thing: people are getting used to these rates. Sure, they’re higher than the ridiculously low pandemic-era rates, but they’re still manageable. And let’s not forget rising wages—people are slowly clawing back their purchasing power, which helps offset the higher rates.
More Sellers, More Homes, More Choices
Zillow is predicting a loosening of inventory in 2025, which is music to buyers’ ears. More homes on the market mean less pressure, more options, and a chance to negotiate.
What Zillow Says:
The lock-in effect (where sellers don’t move because they’re tied to super-low mortgage rates) is fading, leading to more inventory.
What I Think:
Zillow nailed it here. I’d add that it’s not just about the lock-in effect fading—there’s also a growing group of people who bought after those ultra-low rates disappeared. These homeowners don’t have the same hesitation to sell, so there’s less friction in the market.
More homes for sale mean a healthier market for everyone. Buyers won’t feel rushed to make decisions, and sellers can expect fair (if not sky-high) offers.
Home Prices: Slow and Steady
Zillow expects home values to grow by about 2.6% in 2025—similar to this year’s pace. That’s modest, but after years of dramatic swings, it’s actually a good thing.
What Zillow Says:
Modest price growth and more inventory mean buyers have more leverage.
What I Think:
Stability is a win-win. For buyers, it means you’re less likely to overpay or get caught in a bidding war. For sellers, you can still expect appreciation, especially if you price your home competitively.
Small Homes Are Big News
Zillow points out a shift toward smaller, cozier homes. Listings using the word “cozy” increased by 35% in 2024, and buyers are leaning into this trend as a way to stay within budget and embrace intentional living.
What Zillow Says:
The post-pandemic demand for big, open spaces is giving way to a love of smaller, more functional homes.
What I Think:
This makes total sense. Smaller homes are more affordable and easier to maintain, which is a big plus in today’s market. If you’re selling a larger property, it’s worth considering how to highlight its functional spaces to appeal to modern buyers.
Renters: Grab Deals While You Can
The rental market was relatively friendly in 2024, with lots of concessions (think free rent or discounted parking). But Zillow predicts those deals will dry up as the multifamily construction boom slows in 2025.
What Zillow Says:
Rent growth will pick up again in the second half of the year as concessions fade. Pet-friendly rentals will be in high demand as more renters prioritize their furry friends.
What I Think:
If you’re renting, don’t wait too long to lock in a lease—those deals won’t last. And landlords, take note: renters want pet-friendly spaces. Ignoring this trend could mean missing out on quality tenants.
The Big Picture: What 2025 Means for You
The housing market in 2025 is looking a lot more balanced, which is great news for buyers, sellers, and renters alike.
For Buyers: More inventory, falling rates, and modest price growth give you more options and negotiating power.
For Sellers: As long as you price competitively, you’ll benefit from increased market activity and motivated buyers.
For Renters: Act early to lock in favorable terms, and prioritize pet-friendly rentals if you need them.
My Take
Zillow’s predictions align pretty well with my view that the market’s transitioning into a healthier, more predictable space. If mortgage rates can slide back and sustain at around 6%, it should be the tipping point that brings stability, and as people adjust to this new normal, we’ll see more homes hitting the market.
The result? Likely a year of opportunities for anyone prepared to make a move.
Let’s Make 2025 Your Year
Whether you’re looking to buy, sell, or rent, I’m here to help you navigate the market with confidence.
Contact me today to discuss your goals and create a plan tailored to your needs.
Thanks for reading!
-Joe
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