Housing Market 2025: 4 Key Trends to Watch, According to Zillow

The US housing market is set for another transformative year in 2025, with shifts that could bring both opportunities and challenges for homebuyers and sellers. Zillow's latest market outlook reveals some fascinating predictions that could reshape how Americans think about real estate.

The Big Picture: A Market in Transition

After a challenging 2024 marked by high mortgage rates and elevated home prices, the housing market is showing signs of gradual normalization. The National Association of Realtors reports a promising 2.9% year-over-year increase in existing-home sales in October—the first annual rise in three years.

Zillow's Top 4 Housing Market Predictions

1. Sales are Heating Up

Expect more movement in the housing market. Zillow predicts home sales will increase to 4.3 million in 2025, up from 4 million in 2024. The good news for buyers? More inventory means more negotiating power and time to make decisions.

2. Mortgage Rates: Expect the Unexpected

Get ready for a rollercoaster ride with mortgage rates. After fluctuating significantly in 2024, Zillow anticipates continued volatility. Smart buyers and homeowners should stay alert for refinancing opportunities during rate dips.

3. Southwest: The New Buyer's Paradise

While the Southeast has dominated as a buyer's market, the Southwest is emerging as a hotspot for home hunters. More inventory and potentially lower competition could create attractive opportunities for buyers. However, falling mortgage rates could quickly change the dynamic.

4. Small is the New Big

"Cozy" is more than just a buzzword—it's a housing trend. Zillow notes a 35% increase in "cozy" listings, signaling a growing interest in smaller, more affordable homes. This trend is particularly noticeable in urban areas as remote work continues to influence housing preferences.

Expert Insight

Skylar Olsen, Zillow's chief economist, offers a word of caution: "While the market is becoming more buyer-friendly, it's still going to be a bumpy ride. Stay flexible and be prepared to act quickly when opportunities arise."

What This Means for You

• Buyers: More options, potential for negotiation

• Sellers: Prepare for increased competition

• Investors: Watch for emerging market opportunities

The Bottom Line

The 2025 housing market promises to be dynamic, with potential benefits for those who stay informed and adaptable. Whether you're looking to buy, sell, or invest, knowledge is your most valuable asset.