On The Market

Weaker Home Prices Ahead | Zillow Downgrades 2025 Home Price Forecast

Feb 27, 2025

Orphe Divounguy, a Senior Economist at Zillow, shares critical insights into the housing market's shifting landscape. He discusses Zillow's downgraded home price forecast for 2025, attributing it to rising inventory and suppressed buyer demand due to high mortgage rates. The conversation delves into the impacts of multifamily construction on rent prices and explores whether the market has reached a supply-demand equilibrium. Divounguy also highlights potential factors that could reignite buyer demand in this stagnant environment.

31:51

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Orphe Divounguy

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Quick takeaways

Zillow's revised forecast indicates a significant downgrade in projected home price growth for 2025 due to increased inventory and suppressed buyer demand.

Regional housing trends show that affordable areas are experiencing price growth, driven by strong local labor markets and economic opportunities.

Deep dives

Current Housing Market Trends

The housing market is experiencing a notable shift, characterized by an increase in the number of sellers compared to buyers. As winter typically sees a slowdown in housing activity, the recent uptick in sales signifies a positive trend for the upcoming home shopping season. Despite forecasts predicting home value growth to be weaker, there are hints of optimism as mortgage rates have recently declined, boosting buyer interest. This environment suggests a potential modest rebound in home sales, moving slightly above the drastic lows observed in 2024, based on a supportive combination of factors like increased inventory.

Intro

2min

Housing Market Dynamics: Trends and Optimism

8min

Navigating Home Price Forecasts and Market Implications

2min

Navigating Housing Market Trends

11min

Navigating Future Housing Trends and Affordability Solutions

4min

Only two months into 2025, Zillow has significantly changed its original housing market prediction. With rising inventory, suppressed buyer demand from high mortgage rates, and sluggish market sentiment, Zillow’s home price forecast has been downgraded. Why the change, and what data is leading Zillow to project little or no home price growth this year? Orphe Divounguy, Senior Economist at Zillow, is on to share.

With a downgraded forecast, the question becomes: is the housing market leveling off, or could we be in store for home price dips? How will rent prices be affected with the massive wave of multifamily construction finally starting to taper off? With less supply coming online, will these units get absorbed, resulting in higher rents for single-family homes?

Have we finally reached the supply-demand equilibrium, putting the housing market on pause? What’s the one thing that could reignite buyer demand and lead to home price appreciation? Or, is this the new normal, and with little interest rate relief in sight, are we headed for years of a stagnant housing market? We’re getting Orphe’s expert take!

In This Episode We Cover

Zillow’s new February 2025 housing market forecast (and the sizable home price forecast downgrade)

Why home prices are stagnating, and the one crucial factor causing this

Mortgage rate predictions and whether we’ll see some real rate relief this year

Single-family and multifamily rent price predictions for 2025 (which will see the most growth?)

What should investors do: sit on the sidelines or capitalize on current conditions?

And So Much More!

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