The latest market prediction from a major mortgage stakeholder offers a more optimistic outlook for homebuyers in 2025 than other organizations’ forecasts.
Economists with real estate marketplace Zillow predict more buyers will come out ahead in a bumpy 2025, as the housing market could still be challenged by unpredictable mortgage rates.
“Buyers can expect a bit of extra breathing room in 2025 with more inventory looking set to shake loose,” Zillow Chief Economist Skylar Olsen predicted.
The company expects a more active housing market next year, telling buyers to hold on tight. “Those hoping to buy — or even refinance — should buckle up for a bumpy ride and stay ready to move when conditions are right,” Olsen pointed out.
Mortgage rates dipped to two-year lows in September, the same week the Federal Reserve Open Market Committee made the first cut to its federal funds rate since 2020. Since then, however, rates began to tick up again to nearly 7%. This is changing the affordability picture for buyers, Olsen noted.
“While affordability challenges will remain, buyers should expect more homes on the market, meaning more time to consider their options and more leverage in negotiations. Signs point to mortgage rates easing in 2025, but as we saw in 2024, mortgage rates rarely follow the expected path. What is more certain is that buyers should expect plenty of ups and downs throughout the year.”
Recent predictions from Fannie Mae offer an upwardly revised outlook on mortgage rates, coupled with a downward revision to existing home sales for the remainder of 2024 and into 2025.
Economists with the government-sponsored enterprise (GSE) now anticipate existing home sales to total 4.01 million in 2024, revised down from their previous projection of 4.06 million, to represent a 30-year low. Their new outlook for existing-home sales in 2025 is 4.18 million, down from 4.52 million.
On the other hand, mortgage loan originators (MLOs) who follow Zillow can expect more home sales and modest growth in home values (+2.5%) next year, according to their analysts.
The company forecasts 4.3 million existing-home sales in the coming year, up slightly from 4.1 million in 2023 and a projected 4 million in 2024.
Zillow predicts buyers’ markets will spread to the Southwest in 2025 as inventory continues to come unstuck in relatively affordable markets.
“If mortgage rates fall more than expected, that dims the prospect that buyers markets will spread west,” Olsen said. “It is anticipated that a significant mortgage rate dip would bring more buyers than sellers back to the market, increasing competition and tilting negotiating power in favor of sellers.”
Buyers are also seeking smaller, more affordable homes than they were pre-pandemic, and Zillow identified the word “cozy” in 35% more home listings in 2024 than the year prior.
