Will house prices fall in 2025? Zillow issues housing market forecast

The U.S. housing market has been a tough place for buyers in the past few years, with homes becoming more expensive, interest rates staying high, and housing inventory being low. Now, real-estate marketplace Zillow is predicting house prices will again rise modestly next year.

“Zillow forecasts 2.6 percent home value growth in 2025, a relatively slow pace that is similar to this year’s growth,” the company said in a statement on November 25. “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.

While full-year house price details will not be available until the new year, if Zillow’s 2025 estimate comes true, it will be on par with 2024. The current median house price in the U.S. is $359,099, having risen by 2.6 percent in the year to October 2024, according to Zillow.

However, Skylar Olsen, Zillow’s chief economist, said “more inventory should shake loose in 2025, giving buyers a bit more room to breathe.”

Other estimates indicate higher price rises, with Goldman Sachs predicting in September that there will be a 4 percent increase on current values in 2025. Fannie Mae has predicted a 3.6 percent boost, while the National Association of Realtors (NAR) estimates prices will grow by 1.8 percent.

In the U.S., house prices have skyrocketed in recent years. In March 2020, the average home price was $213,212, according to the St. Louis Federal Reserve Bank. Just over two years later in June 2022, prices reached $301,184 – nearly $100,000 more.

Mortgage Rates for 2025

While house prices look like increasing next year, how mortgage rates will pan out throughout 2025 is a little less easy to predict. Mortgage rates have been subject to increases and dips throughout 2024, with the 30-year average fixed-rate home loan being highest at the beginning of the year at 7.29 percent. It dropped to 6.6 percent at the end of January and into February, and rates climbed again in May to 7.22 percent.

This trend has continued into the latter part of this year: after falling in September to just above 6 percent, as of November 21, the rate reached 6.84 percent.

Housing Inventory for 2025

Housing inventories have recently shown improvement, reaching a 4.3-month supply by the end of September 2024, according to data from the NAR.

The NAR said that although this remains below the 5-6 months generally required for a more balanced market, it is considerably better than the 2.9-month supply recorded in February this year.

“Home sales have been essentially stuck at around a 4-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing,” NAR Chief Economist Lawrence Yun said in October. “There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy.”