Erratic and dramatic mortgage rate movements that heavily influenced the housing market in 2024 are destined to “play a major role” in the coming year, according to real estate firm Zillow‘s (Nasdaq: Z and ZG) latest market report.
Zillow Chief Economist Skylar Olsen said:
“There’s a strong sense of déjà vu on tap for 2025. 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. Those shopping this winter have plenty of time to choose and a relatively strong position in negotiations.”
According to the real estate / US property market report from Zillow, the forecast for slowly declining mortgage rates in 2025 spells “gradual growth for both sales and home price appreciation in Zillow’s outlook.”
A September dip in rates gave a second-half tailwind to this year’s home sales2 — real estate firm Zillow expects “4.06 million sales for 2024.”
That number should rise “slightly to 4.16 million in 2025,” according to the US property market report.
The report further noted that real estate / home values are forecast to tick up “2.2% over the course of 2025, right in line with the 2.3% annual appreciation observed in November.”
Recent and unpredictable drops in mortgage rates further impress “the need for buyers to be ready to move when opportunity arises.”
Zillow’s new BuyAbility tool uses current daily mortgage rates to “determine a home budget that is affordable for individual users, based on their unique financial situation.”
After the ups and downs of the past five years, many “measures of the housing market are trending closer to historical norms.”
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.”
Total for-sale inventory is similarly clawing its way “out of a deep hole that developed early in the pandemic.”
Zillow further noted in the real estate report that it is now about “26% below the norms of 2018–2019, the smallest shortfall seen since September 2020.”
Both of these should continue to improve next year, but again, “progress will depend heavily on what happens with rates.”
The report from Zillow added that shoppers looking for homes during the slower winter months may have an “opportunity to snag a deal in a market that’s becoming increasingly buyer-friendly.”
Zillow’s market heat index shows competition for homes “cooled nationwide and in 36 of 50 major U.S. metro areas from October to November.”
Although the number of options available to shoppers today are lower than they will likely see in the spring, there’s also “less competition in the field.”
The report from Zillow pointed out thatthe share of homes that sold for more than list price was “below 28% in October (the latest data available), continuing a downward trend that began in July.”
Compared to the spring rush, buyers today should have an “easier time negotiating from a position of safety, with a greater chance to buy contingent on inspections or repairs and a lesser chance of being drawn into a bidding war.”
As clarified in the update, the Zillow market report is a monthly overview of the national and local real estate markets.
The report is compiled by Zillow Research.
As covered, Zillow Group, Inc. is reimagining real estate to “make home a reality for more and more people.” However, we all know that this goal is becoming increasingly unattainable for future generations. And a lot more is needed at a national level to change this in any meaningful way.
As the “most visited” real estate site 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.”