Will home sales increase next year? That depends on “erratic and dramatic” mortgage rate movements, says real estate marketplace Zillow, perhaps scaling back a little from some earlier predictions for 2025.
In its latest market report, Zillow says next year's market is likely going to be more of the same.
"There's a strong sense of déjà vu on tap for 2025,” said Skylar Olsen, Zillow's chief economist. “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."
In November, the company had said it expects a more active housing market next year, also noting opportunities for buyers and homeowners as well. “Those hoping to buy – or even refinance – should buckle up for a bumpy ride and stay ready to move when conditions are right,” Olsen stated.
Now, with some nuance in the rhetoric, Zillow is saying home sales “are poised to increase” next year, so long as rates “cooperate.” The company says it expects 4.06 million home sales for 2024, with that number rising by only about 100,000 to 4.16 million sales in 2025, or about a 2.5% increase. That's a slight revision down from an earlier forecast of 4.3 million home sales in the coming year.
Meanwhile, home value growth will be “low and slow,” according to Zillow. Home values should increase by about 2.2% overall during 2025. That tracks closely with the 2.3% annual appreciation the company observed in November, and is down from a 2.5% 2025 home value growth prediction last month.
Inventory and new listings are trending upward, the company noted in the report, reducing pandemic-era deficits. But word choice matters. Home inventory is “clawing its way out of a deep hole that developed early in the pandemic,” the report reads, and “is now about 26% below the norms of 2018 and 2019, the smallest shortfall seen since September 2020.”
Specifically, inventory levels are 26.3% lower than pre-pandemic levels for the month.
Drilling deeper into inventory, new listings decreased by 21.6% month over month in November, according to Zillow, but are up by 0.6% this month compared to the same time last year. The median age of inventory was 70 days, which is 14 days longer than last year.
Overall, “after the ups and downs of the past five years, many measures of the housing market are trending closer to historical norms,” the report states. “The flow of new listings to the market is still nearly 14% lower than it was before the pandemic, but that's great progress over March's 25% deficit."
