'More Inventory Should Shake Loose In 2025,' Says Zillow Chief Economist

According to new forecasts from Zillow, homebuyers may finally catch a break in 2025 as increased inventory shifts market dynamics in their favor. The real estate platform projects existing home sales will climb to 4.3 million next year, up from four million in 2024 and 4.1 million in 2023.

“Buying a home in 2024 was surprisingly competitive given how high the affordability hurdle became. More inventory should shake loose in 2025, giving buyers a bit more room to breathe,” Skylar Olsen, Zillow’s chief economist, said in a press release.

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The market shift could expand beyond the Southeast, where 13 major metro areas, including Miami, Atlanta and Tampa, currently favor buyers. Zillow anticipates buyer-friendly conditions spreading to Southwestern markets as inventory grows in more affordable regions.

Home values are expected to rise at a more modest 2.6% in 2025, though mortgage rate volatility remains a wild card. The September 2024 rate drop sparked a brief surge in affordable listings before rates climbed back toward 7%, pointing to the market’s sensitivity to rate volatility.

The swings should continue, potentially creating windows for both purchases and refinancing. “As we saw in 2024, mortgage rates rarely follow the expected path,” Zillow noted, advising buyers to “stay ready to move forward when the time is right.”

Beyond market dynamics, buyer preferences continue evolving. According to Zillow, the term “cozy” has shed its euphemistic reputation as more Americans embrace smaller homes. The rental market also reflects changing lifestyles, with 58% of renters now owning pets – a trend forcing property managers to adapt their policies.

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“Americans are adapting to sky-high costs by embracing coziness, a term that for so long has been a thinly veiled critique in real estate lingo,” Olsen said in the release. “Many are also viewing renting as a longer-term lifestyle.”

According to Zillow, the multifamily construction boom that helped moderate rent prices is expected to slow by late next year, likely reducing rent concessions like free parking and discounted months. However, continued wage growth could help maintain rental affordability improvements.

Zillow cautions that a sharp mortgage rate drop could rapidly shift market dynamics back toward sellers by drawing more buyers into the market.

That uncertainty means buyers and sellers must remain flexible and responsive to market conditions throughout the next year.

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