Housing Market Predictions: Home Prices to Drop by 0.9% in 2025

Housing market predictions expect prices to trend downward, with projections indicating a slight overall decrease by the end of 2025. This shift suggests a cooling period after several years of rapid appreciation, and understanding the factors driving this are crucial whether you're looking to buy, sell, or simply keep an eye on your most significant investment.

Housing Market Predictions: Home Prices to Drop by 0.9% in 2025

It’s a bit of a mixed bag out there on the housing front, and honestly, that’s how it often feels when you’re navigating the real estate world. After a period where it felt like home prices were on an unstoppable rocket ship, the latest forecasts are painting a slightly different picture. Experts are suggesting that housing market predictions expect prices to trend downward, and it’s something worth paying close attention to. This doesn't usually mean houses everywhere will suddenly become cheap, but it does suggest a shift from the dizzying heights we've seen.

I’ve been following the housing market closely for a while now, both as a homeowner myself and through my interactions with various sources and data. It’s fascinating to see how much the market can ebb and flow, influenced by so many different things happening in the economy and in our own lives. Zillow, a name you’ll likely recognize in the real estate space, recently put out some updated forecasts, and they’re definitely worth unpacking.

What the Experts Are Saying: A Look at Zillow's Forecast

Zillow’s latest Home Value and Home Sales Forecast, as of July 2025, provides some key insights. They're looking at a situation where home values are expected to end 2025 down 0.9%. Now, 0.9% might not sound like much on its own, but when you consider the scale of home prices, it’s a noticeable shift from the upward march we’ve grown accustomed to.

This forecast isn't just a wild guess. It's based on a lot of data and analysis of what's happening right now. One of the biggest drivers behind this anticipated cooling, according to Zillow, is the fact that home sales continue to bounce along the bottom. Why? The simple answer is that high costs are holding buyers back.

Think about it: if you're looking to buy a home, you're usually dealing with a mortgage. Mortgage interest rates have been higher than they were a couple of years ago, and that significantly impacts how much house you can afford or what your monthly payment will be. Plus, the general cost of living has also gone up for many people. When your everyday expenses are higher, and borrowing money costs more, it naturally puts a damper on big purchases like a house.

Zillow projects existing home sales in 2025 to be around 4.09 million. This is only a slight increase of about 0.6% from 2024. That’s not exactly a surge, is it? It suggests that while some people are still buying homes, the market isn’t exactly booming with activity. It’s more of a steady, perhaps even sluggish, pace.

Rent Growth Slows Down, Too

It’s not just home prices that are seeing a change; rent growth is also expected to slow down significantly. Zillow forecasts 2025 rent growth at multi-year lows. Specifically, they’re saying single-family rents might increase by 2.5% in 2025, down from 4.5% in 2024. For apartments (multifamily homes), the increase is predicted to be even smaller, at just 1% in 2025, compared to 2.4% in 2024. If these numbers hold true, they’d be some of the lowest rent increases we’ve seen in years, according to Zillow's data.

This slowdown in rent growth is a pretty strong indicator of broader economic conditions affecting housing. When demand for rentals softens, or when the overall supply of rental units increases, rents tend to stabilize or grow at a slower pace. It could also reflect people having less disposable income to spend on rent, or perhaps more people choosing different living situations.

Why This Downward Trend? Let’s Break It Down

From my perspective, this expected shift in the housing market isn’t a surprise, though the exact numbers are always interesting to see. Here are some of the key reasons I believe are contributing to this trend:

• Higher Interest Rates: This is probably the biggest one. When borrowing money to buy a house becomes more expensive (due to higher mortgage rates), it impacts affordability. Buyers need to step back, reassess their budgets, and often look for less expensive homes or put their plans on hold altogether. This reduced demand can lead to price adjustments.
• Affordability Issues: Even if rates weren't significantly higher, home prices had already climbed so much in recent years that many potential buyers were priced out. When a significant portion of the population can’t afford to buy, it naturally limits the pool of buyers and can put downward pressure on prices.
• Slightly Less Robust Labor Market: Zillow’s forecast also mentions a “surprisingly more sluggish labor market.” When job growth isn’t as strong, or when there’s uncertainty about future employment, people tend to be more cautious about making major financial commitments like buying a home.
• Increased Inventory: The report notes that new listings of existing homes are forecast to outpace sales, helping inventory to finish the year higher. When there are more homes for sale than people actively buying them, sellers might have to lower their prices to attract buyers. It’s basic supply and demand. The increase in available homes for sale has been more noticeable in regions like the West and the South.

It's important to remember that these are predictions. The housing market is incredibly complex, and many things can influence it. Zillow itself notes that their forecast for overall home values was revised slightly upwards from their previous projection partly because new listings from sellers have been lower than expected. This highlights the dynamic nature of the data.

Regional Differences Matter: Not All Markets are Equal

It’s crucial to understand that housing market predictions expect prices to trend downward on a national level, but this doesn't mean every single city or town will experience the same fate. Real estate is hyper-local. What happens in one part of the country might be very different from another.

Let’s look at some of the data points from Zillow to illustrate this:

RegionName	RegionType	StateName	31-08-2025	31-10-2025	31-07-2026
United States	country		0.0%	0.2%	0.4%
New York, NY	msa	NY	0.2%	0.3%	0.0%
Los Angeles, CA	msa	CA	-0.1%	0.0%	-0.1%
Chicago, IL	msa	IL	0.3%	0.5%	0.5%
Dallas, TX	msa	TX	-0.4%	-1.0%	-1.3%
Houston, TX	msa	TX	-0.1%	-0.3%	-1.0%
Washington, DC	msa	VA	0.0%	-0.3%	-1.5%
Philadelphia, PA	msa	PA	0.3%	0.6%	1.2%
Miami, FL	msa	FL	-0.5%	-0.9%	0.5%
Atlanta, GA	msa	GA	-0.2%	-0.4%	0.3%
Boston, MA	msa	MA	0.1%	0.0%	0.0%
Phoenix, AZ	msa	AZ	-0.3%	-0.8%	-0.6%
San Francisco, CA	msa	CA	-0.6%	-1.7%	-4.1%
San Diego, CA	msa	CA	-0.3%	-0.9%	0.2%

Note: The data above shows percentage change in home values. Dates indicate forecast periods.

Looking at this table, you can see a lot of variation. For example, while San Francisco, CA is predicted to see a significant drop of -4.1% by July 2026, Chicago, IL is forecast to see modest growth. Dallas, TX and Washington, DC are also showing downward trends, while Philadelphia, PA is predicted to experience some growth. This really drives home the point that national averages can be misleading when you're dealing with something as specific as real estate.

What does this mean for you? If you’re in a market that’s predicted to cool down more significantly, it might be a better time for buyers and potentially more challenging for sellers who are expecting to get premium prices. Conversely, in markets predicted to be more stable or even see slight growth, the dynamics might be different.

The Seller’s Perspective: Adjusting Expectations

For anyone thinking of selling their home, this forecast suggests that adjusting expectations might be a good idea. The days of the bidding wars where houses sold for way over asking price might be somewhat less common, at least for now.

• Pricing Strategy is Key: Pricing your home correctly from the start will be more important than ever. Overpricing can lead to your home sitting on the market longer, potentially requiring price reductions later.
• Presentation Matters: With more inventory, homes that are well-maintained, updated, and staged to impress will likely stand out more.
• Be Prepared for Negotiation: Buyers might have a bit more room to negotiate on price or terms.

This isn't to say you can't sell your home or get a good price. It just means the market might not be as forgiving of overpricing or less-than-ideal presentation as it was during the peak of the boom.

The Buyer’s Perspective: A Chance to Catch Your Breath?

For those who have been waiting on the sidelines, hoping for a better opportunity, this forecast could offer some relief. The possibility of slightly more stable prices and a bit more inventory might make it a more favorable time for buyers.

• More Negotiation Power: Buyers may find they have more leverage when making offers.
• Less Competition: You might not face dozens of other offers on every single house.
• Opportunity for Home Upgrades: With a slight dip or stable prices, some buyers might be able to afford a slightly better or larger home than they could a year ago.

However, it's still important to remember that this isn't a buyer's market across the board, and affordability is still a major factor due to interest rates. So, while prices might trend downward slightly, the cost of borrowing can still make it tough.

What About Renters?

The slowdown in rent growth is good news for renters. It means that the sting of rising rents might lessen. However, a 2.5% increase on a rental price is still an increase, and for those already struggling with housing costs, even smaller increments can be felt. It’s a welcome change from rapid increases, but affordability remains a concern for many.

Looking Ahead:

The housing market predictions expect prices to trend downward by a small margin for now. This isn't a sign of a crash, but rather a return to more normal conditions after an unusually hot period. It’s a market that’s still very much influenced by broader economic factors like inflation, interest rates, and job stability.

As I see it, the key takeaway is to stay informed and be realistic. The market is always changing, and what was true a year ago might not be true today. Whether you're buying, selling, or holding, understanding these trends can help you make the best decisions for your financial future. It's a time for careful consideration, not panic.