Zillow: Home Values to Decrease by the end of 2025

Summary

Zillow’s latest housing forecast predicts a slight national decrease in home values by 0.9% by the end of 2025, though a nationwide crash is unlikely. Existing home sales are projected at 4.09 million, near historic lows, while inventory increases vary regionally, driving different price trends. The Northeast and Midwest may see modest gains, while the Southwest and parts of California face declines. Historical data shows prices often remain stable despite falling sales if inventory is limited. Mortgage rates remain elevated, impacting affordability, but small rate declines could stimulate activity. Overall, the market shows minor adjustments rather than dramatic shifts.

Takeaways

• 🏠 Zillow predicts U.S. home values will decrease modestly by 0.9% by the end of 2025, but a nationwide crash is not expected.
• 📉 Existing home sales are forecasted at 4.09 million, a slight increase from 2024 but still near a 29-year low.
• 🌍 Some regions with low inventory, like the Midwest and Northeast, are expected to see home value increases (e.g., Milwaukee +0.3%, Hartford +3.2%).
• 📊 Areas with higher inventory, including parts of Texas, Southwest Florida, and Mountain West, are likely to experience home value declines (e.g., Austin -3.5%, Phoenix -6%).
• 📈 Historical data shows home prices can rise even when sales decrease, as long as inventory remains relatively tight.
• 🏘️ Current national inventory is 4.6 months, which is near a balanced market (4–5 months), unlike the Great Recession where inventory exceeded 6.5 months.
• 💰 Mortgage rates are currently at 6.56% for a 30-year fixed loan, slightly higher than a year ago, but trending downward from late 2024 highs.
• 📌 Zillow’s forecast revisions indicate slower declines than previously expected, partly due to sellers delisting homes and limited new supply.
• 📊 Comparisons with other forecasts show variations: Redfin predicts +4% price growth, Realtor.com +3.7%, and Fannie Mae +2.8%, reflecting differences in methodology.
• ⚖️ Market balance is key: prices drop significantly only when supply surges and demand collapses, which is not expected in 2025.
• 💡 Interest rate movements will play a major role in buyer activity; lower rates could stimulate sales, while affordability constraints may still limit demand.
• 🛑 Low transaction volumes over the past three years (3 million fewer sales than average) highlight a historically slow market but not necessarily falling prices.
• 📈 Regional trends are important: local inventory levels, not national sales alone, largely determine whether home values rise or fall.

Q & A

What is Zillow's forecast for U.S. home values by the end of 2025?

Zillow predicts that U.S. home values will decrease by 0.9% by the end of 2025.

How does Zillow's forecasted home sales for 2025 compare to 2024?

Zillow expects home sales in 2025 to match 2024 levels at approximately 4.09 million existing homes, which is near a 29-year low.

Which regions are seeing increases in inventory and potential price decreases?

The West and South regions, including cities like Denver, Phoenix, Austin, Texas, and parts of southwest Florida, are experiencing large increases in inventory, which may lead to slight decreases in home prices.

Are there regions where home values are still expected to rise?

Yes, areas in the Midwest and Northeast, such as Milwaukee, WI (+0.3%) and Hartford, CT (+3.2%), are expected to see home value increases due to limited inventory.

How does current inventory compare to the Great Recession?

Current inventory is about 4.6 months, which is below the levels seen during the Great Recession when it peaked at over 10 months. This suggests only moderate price declines rather than a market crash.

What factors contributed to home price declines during the 2006–2009 period?

The primary factor was rapidly increasing inventory, which created a buyer's market, rather than declining sales alone.

How do other major forecasts for 2025 compare with Zillow's predictions?

Redfin forecasts 4.1–4.4 million sales with prices up 4%, Realtor.com forecasts 4.1 million sales with prices up 3.7%, and Fannie Mae predicts 4.09 million sales with prices up 2.8%.

What are the differences in methodology between Zillow, Redfin, and Fannie Mae forecasts?

Zillow uses their Home Value Index, Redfin uses median sold price, and Fannie Mae uses their own Home Price Index, making direct comparisons less precise.

What are current mortgage rates and how might they influence home sales?

The average 30-year fixed mortgage rate is 6.56%, slightly higher than last year's 6.35%. Lower rates in the future, such as falling into the low 6% range, could help spur home sales.

Does a decrease in sales automatically lead to lower home prices?

No. Historically, home prices can still rise despite declining sales if inventory remains limited. Price changes are more strongly influenced by the balance of supply and demand.

Why is Zillow's forecast for price decline smaller than previous months?

The revision from a larger expected decrease to only 0.9% is likely due to sellers delisting their homes and a lower than expected new supply entering the market.

Is a national housing market crash expected according to the video?

No. The video emphasizes that while prices may decline slightly, a national housing crash is unlikely unless both supply and demand shift dramatically and unemployment rises sharply.