Inside Zillow’s 2025 Housing Market Predictions with Chief Economist Skylar Olsen

By Skylar Olsen

As we stand on the cusp of 2025, mortgage rates once again take center stage in the real estate landscape. There’s no denying affordability challenges are likely to stick around next year, but an anticipated increase in available inventory is leaving us optimistic about a modestly improved outlook for buyers.

Prospective buyers and homeowners hoping for an opportunity to refinance should prepare for a bumpy ride with mortgage rates and be ready to act swiftly when favorable conditions arise. As for renters, affordability is expected to improve next year after the recent construction boom, as long as wages continue to rise.

Curious what’s in store for next year? Check out Zillow’s predictions below:

Housing market activity will accelerate

In 2025, Zillow expects to see more sales — 4.3 million to be exact — and modest 2.6% home value growth. While affording a home will still be a tall hill to climb, the influx of inventory should provide buyers with more options and negotiating power.

Brace yourself: Mortgage rates are poised to fluctuate?

While mortgage rates look likely to end next year lower than they start, fluctuations throughout the year are anticipated. Buyers should stay agile and leverage tools like Zillow Home Loans' BuyAbility tool to help calculate a personalized home budget at any given moment based on current rates.?

Buyers markets head west

Buyers markets are predicted to expand from the Southeast to the Southwest, meaning buyers will have more opportunities and there will be increased competition among sellers. Effective pricing strategies and marketing tools like Zillow Showcase will be more important than they’ve been in some time for sellers to stand out.

Americans cozy up to small-home living?

The trend towards smaller, cozier homes continues to gain momentum as buyers prioritize sustainability and affordability. Listings emphasizing "cozy" spaces are on the rise, up 35% this year compared to 2023, reflecting a shift towards more contained and purposeful living environments.

Rent concessions take a back seat

2024 was a positive year for renters, with steady rent growth and a record share of rental listings offering concessions such as free parking or a free month of rent. This is projected to diminish in 2025, particularly as the year progresses. The torrent of new multifamily construction is projected to slow to more of a steady stream by the end of next year, meaning less competition among property managers.?

Pet-friendly living: A necessity?

Renters are prioritizing cohabitation and pet ownership before homeownership, with the median renter age now at 42. Renting is favored for its affordability, leading to a growing demand for pet-friendly properties among the 58% of renters who own pets — up from 46% before the pandemic. Property managers risk losing applicants in the competitive rental market of 2025 if they do not allow pets, as nearly half of recent renters say they passed on a property because it was not pet-friendly.