Will property prices fall in 2025? Zillow releases housing market forecast

The U.S. real estate market has been a difficult environment for buyers in recent years as homes became more expensive, interest rates remained high and housing inventory was low. Now the real estate marketplace Zillow is predicting that real estate prices will rise slightly again next year.

“Zillow forecasts home value growth of 2.6 percent in 2025, a relatively slow pace similar to this year’s growth,” the company said in a Nov. 25 statement. “Zillow predicts existing home sales will increase by 4.3 million next year,” slightly from 4.1 million in 2023 to an expected 4 million in 2024.

While full-year home price details won’t be available until the new year, if Zillow’s 2025 estimate holds true, they will be at 2024 levels. The current median home price in the U.S. is $359,099, having risen 2.6 percent this year through October 2024, according to Zillow.

However, Skylar Olsen, Zillow’s chief economist, said: “More inventory is likely to be released in 2025, giving buyers a little more breathing room.”

Other estimates suggest higher price increases, with Goldman Sachs in September forecasting a 4 percent rise from current levels in 2025. Fannie Mae has forecast a 3.6 percent increase, while the National Association of Realtors (NAR) is forecasting a 1.8 percent price increase.

In the USA, real estate prices have risen sharply in recent years. According to the St. Louis Federal Reserve Bank, the average home price was $213,212 in March 2020. Just over two years later, in June 2022, prices reached $301,184 – almost $100,000 more.

Mortgage rates for 2025

While house prices are expected to rise next year, the direction of mortgage rates over the course of 2025 is a little less easy to predict. Mortgage rates have seen rises and falls throughout 2024, with the 30-year average fixed-rate home loan peaking at 7.29 percent at the start of the year. At the end of January and February they fell to 6.6 percent, and in May interest rates rose again to 7.22 percent.

This trend continued into the second half of this year: after falling to just over 6 percent in September, the rate reached 6.84 percent on November 21st.

Housing inventory for 2025

According to the NAR, housing inventory has recently improved, reaching 4.3 months of inventory through the end of September 2024.

The NAR said that while this is below the 5 to 6 months generally required for a more balanced market, it is significantly better than the 2.9 months of supply recorded in February this year.

“Over the past 12 months, home sales have essentially remained stagnant at about 4 million units, but factors that typically accompany higher home sales are evolving,” NAR chief economist Lawrence Yun said in October. “There is greater inventory choice for consumers, lower mortgage rates than a year ago and continued job growth in the economy.”