Zillow Predicts Home Sales to Jump in 2025 as Mortgage Rates Fall

A “For Sale” sign is posted in front of a home in San Anselmo, Calif., on March 22, 2023. Justin Sullivan/Getty Images

More homes are expected to be sold across the United States in 2025, with property prices also set to rise, according to a recent report from real estate marketplace Zillow.

Mortgage rates are forecast to decline slowly next year, “setting the stage for modest growth in both sales and home price appreciation,” said the Dec. 12 market report from the company. Zillow expects 4.06 million homes to be sold in 2024, which is expected to increase to 4.16 million next year. Home values are predicted to rise by 2.2 percent in 2025.

In addition, the company sees new listings and for-sale inventory continue improving. However, the rate of improvement would “depend heavily” on the direction of mortgage rates, it noted.

The report said a “late-summer dip” in rates improved home sales in the second half of this year as buyers and sellers took advantage of the situation.

The weekly average rate for a 30-year fixed-rate mortgage hit a high of 7.22 percent in May and then dipped through summer to a low of 6.08 percent in late September. Rates picked up subsequently and are at 6.6 percent for the most recent week.

Zillow said 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.”

“Compared to the spring rush, buyers in the market this winter should have an easier time negotiating from a position of safety.” This gives them a better chance at securing a property while facing a lower probability of “being drawn into a bidding war.”

Meanwhile, real estate brokerage Redfin predicts home prices will rise by 4 percent in 2025, almost double Zillow’s forecast.

The company expects the sale of existing homes to increase by 2 to 9 percent. “If sales post just a small increase, it will be because of high mortgage rates and low inventory, as homeowners continue to hang onto their homes,” Redfin said.

“Sales may post a bigger increase if mortgage rates decline more than expected, and/or if the recent burst in homebuying demand continues.”

Sam Khater, chief economist at Freddie Mac, said earlier that even a modest fall in interest rates had triggered an increase in buyer purchasing demand.

He attributed this to the persistence of “affordability headwinds,” which make buyers enter the market at the slightest perceived advantage.

Housing Affordability

Housing affordability has significantly worsened over the past years.

In 2021, a buyer had to pay only 16.9 percent of their income as mortgage repayments on a median existing single-family home, data from the National Association of Realtors show. In October 2024, this jumped to nearly 25 percent of income.

According to a Nov. 20 statement from the National Association of Home Builders (NAHB), a family earning the country’s median income of $97,800 annually had to spend 38 percent of the income to repay the mortgage on a median-priced new home in the third quarter.

NAHB Chief Economist Robert Dietz said the United States is facing a housing shortfall of roughly 1.5 million units.

“In order to boost the nation’s housing supply, officials at all levels of government must work to eliminate barriers so that builders can build more attainable, affordable housing,” he said.

The incoming Trump administration’s policies are likely to have a major impact on housing affordability.

Real estate listing website Realtor noted that if the administration is able to achieve a high economic growth rate, it could boost incomes.

“And if effective household tax rates go down, as promised by the Trump campaign, we could see a net increase in disposable household income even if incomes don’t rise,” it said. This could make homes more affordable than in recent years.

However, a key risk would be the potential tariffs imposed on imported goods. The move could trigger a trade war which may have an immediate inflationary effect on materials needed to build homes. As for the longer term, the market is expected to price in the impact of tariffs, and construction costs should stabilize.