Mortgage rates are again in the spotlight as 2025 approaches, according to an update from real estate focused firm Zillow (Nasdaq: Z and ZG).
Zillow predicts a more active real estate / property market and more buyers gaining the upper hand in 2025, but those looking to buy — or refinance — should get ready for “a bumpy ride and stay ready to move when conditions are right.”
Skylar Olsen, Zillow chief economist said that buying a property in 2024 was surprisingly “competitive given how high the affordability hurdle became.” They added that more inventory should “shake loose in 2025, giving buyers a bit more room to breathe.”
Olsen also stated that US consumers are now appearing to “adapt to sky-high costs by embracing coziness, a term that for so long has been a thinly veiled critique in real estate lingo.” They further noted that many are also “viewing renting as a longer-term lifestyle.” They also mentioned that a “construction boom has eased pressure on rent prices, putting rent affordability on track to improve next year — that is, as long as wages continue to grow.”
Zillow forecasts 2.6% home / property value growth in 2025, a “relatively slow pace that is similar to this year’s growth.”
For existing home sales, Zillow forecasts “4.3 million in the coming year, up slightly from 4.1 million in 2023 and a projected 4 million in 2024.”
Although affordability challenges will persist, buyers should expect more properties 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.”
Mortgage rates fell in September, briefly “bringing the share of affordable listings to a 19-month high.”
They have since climbed back to nearly “7%,1 changing the affordability picture for home buyers.”
More swings like this are expected in 2025, with “refinancing sprints occurring during the dips.”
Home buyers should stay ready to move forward when the time is right.
Zillow Home Loans’ BuyAbilitySM tool can help by “giving buyers a personalized estimate of the home price and monthly payment that fits within their budget at any given moment (based on current mortgage rates), and showing them homes they can afford.”
At present, 13 major metro areas are buyers markets — where buyers have the upper hand in negotiations, according to Zillow’s market heat index — ‘with most of those in the Southeast.”
Zillow predicts buyers markets will spread to the Southwest in 2025 as inventory continues to “come unstuck in relatively affordable markets.”
Sellers will feel the heat of competition as buyers “will have more homes to choose from.”
It will be more important than in recent years to “work with a great agent to help price and market a home listing well.”
Tools like Zillow Showcase, an immersive listing experience, can help drive more page views, “saves and shares from buyers searching for homes with those attributes, compared to similar neighboring non-Showcase listings on Zillow.”
If mortgage rates fall more than expected, that “dims the prospect that buyers markets will spread west. 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.”
The pandemic-era need for “more and more space” is over. Home buyers will increasingly lean into smaller homes as “a more sustainable, affordable and desirable way to live.”
As covered, Zillow Group, Inc. is reimagining real estate to “make home a reality for more and more people.”
As the “most visited” real estate website in the United States, Zillow and its affiliates help people find and get the home they want by “connecting them with digital solutions, dedicated partners and agents, and easier buying, selling, financing, and renting experiences.”
