Homebuyers faced a challenging year in 2024 with high mortgage rates and steep prices. But Zillow predicts that 2025 could bring notable shifts in the housing market as it continues to stabilize post-pandemic. Here’s what to expect:

1. Home Sales Are Set to Increase

The housing market is showing signs of movement, and Zillow anticipates this trend will gain momentum in 2025. Existing home sales are projected to reach 4.3 million, up from 4 million in 2024, with home prices expected to rise modestly by 2.6%.

Buyers may find more homes on the market, providing them with better negotiating power and more time to make decisions.

2. Mortgage Rates Will Be Unpredictable

Expect mortgage rates to fluctuate throughout 2025. This year, rates swung between lows and highs as markets reacted to inflation and economic conditions. Zillow predicts similar volatility next year, creating windows for refinancing opportunities during rate dips.

3. Southwest May Turn Into a Buyers’ Market

Currently, the Southeast leads as a buyers’ market, but the Southwest might follow suit in 2025. More inventory is expected to become available, giving buyers more options and increasing competition among sellers.

However, if mortgage rates drop significantly, demand could spike, favoring sellers once again.

4. Smaller Homes Will Be in Demand

The trend toward smaller, more affordable homes is likely to continue. Zillow noted a surge in the use of the word “cozy” in listings, signaling a growing interest in downsizing. Smaller condos, particularly in urban areas, are stabilizing in value as larger properties see slower appreciation.

What It Means for Buyers

Zillow’s Chief Economist, Skylar Olsen, says buyers should stay flexible and ready to act when conditions are favorable. While the market is expected to become more buyer-friendly, affordability challenges will persist. Whether it’s navigating mortgage rate dips or exploring new regions, 2025 could offer unique opportunities for homebuyers.