From pet-friendly rentals to new buyer markets, 2025 should be calmer and cozier on the home front.
With 2024 fast receding in the rear view, it’s time to look ahead to see what buyers, sellers and renters can expect over the next year.
2025 should prove to be another breather year for prospective buyers with slower home value growth and mortgage rates that stay below some of the peaks we saw in 2024.
“Buying a home in 2024 was surprisingly competitive given how high the affordability hurdle became,’’ says Zillow® Chief Economist Skylar Olsen. “More inventory should shake loose in 2025, giving buyers a bit more room to breathe.”
It’s also shaping up as a breakthrough year for renters with pets as property managers increasingly recognize that fur babies are family members. Read on to see what other predictions our economists have for 2025.
1. Home values will grow at a modest rate
After several years of skyrocketing values, 2024 brought us some much-needed breathing room and 2025 is expected to offer more of the same.
Home values nationally are forecast to grow by 2.6% — a softening that would be welcome news for financially stressed buyers. The forecast is based on the assumption that interest rates will stay around 6.5%, and that more sellers will list their homes for sale.
Zillow forecasts 4.3 million sales of existing homes in 2025, up slightly from the 4 million expected to sell in 2024.
The combination of lower rates and an uptick in the number of for-sale listings could help make even more markets affordable for buyers, provided that incomes keep pace. A calmer market could also make it easier for buyers to budget for a down payment instead of playing catchup when values escalate rapidly.
Still, the market remains challenging for buyers and the local picture varies widely. Among the nation’s top 50 metros, Hartford is expected to have the biggest bump in home values, with 4.2% growth projected from October 2024 to October 2025. In New Orleans, values are expected to decline 3.8% over the same period.
2. Mortgage rates expected to ease, but remain volatile
Given the volatility of mortgage interest rates over the past two years, it’s impossible to predict where rates will land in 2025. Our best educated guess is that mortgage rates will be lower by the end of 2025 than they’ll be at the start of the year, with the possibility of volatility in between. The picture can change depending on inflation, income growth, unemployment and other economic factors.
Volatile rates offer risk and opportunity. Even small changes in interest rates can have an impact on the size of your mortgage payment, so serious buyers — especially those in expensive markets — should keep an eye on rates to see how it affects not only their future mortgage payment but how much they can comfortably spend on a home.
PRO TIP: If you’re considering buying or refinancing in 2025, you can track how rates affect your home-buying budget with BuyAbilitySM, a tool powered by Zillow Home Loans℠. BuyAbility lets you track how much you can afford to spend on a home based on your personal financial situation and current mortgage rates.
3. The Southwest joins the list of regions tipping in buyers’ favor
The Southwest is expected to join the Midwest and the South as regions with markets favoring buyers.
In buyer’s markets, homes are on the market longer, price cuts occur more frequently and homes often sell for less than their asking price. Sellers in these types of markets need to pay special attention to pricing and marketing their homes since they’ll be facing stiffer competition from other sellers.
The new buyer’s markets Zillow® predicts will be the product of more listings from homeowners who have been sitting on the sidelines, and improvements in affordability as interest rates ease. The bump in more affordable options likely means these markets will also have the greatest number of movers.
One important caveat: If mortgage rates fall more than expected, it’s less likely that buyer’s markets will spread to the Southwest. This is because a rate dip would pull more buyers than sellers back to the market, which would increase competition among buyers and give sellers the edge in negotiations.
4. Deals for renters will be less common
Renters were able to claim all sorts of concessions in 2024, when new multi-family rental construction hit a 50-year high. The sizzling building boom is expected to drop off by the end of 2025, easing some of the competitive pressures felt by landlords and property managers as the new rentals came online.
Compared to 2024, new rental construction is expected to drop by 21% during the first half of 2025, and drop even further as the year progresses. With fewer buildings coming online, apartment rents are expected to stabilize in 2025, a scenario that could make it harder for renters to negotiate for that free month of rent, says Olsen.
Still, the decline is being measured against a banner year so renters are unlikely to see the kind of rent increases they would likely face if there was a shortage of rentals, says Olsen.
As of October 2024, the typical U.S. rent was $2,009 a month, a 3.3% increase from the previous year.
5. Pet-friendly will be a non-negotiable for property managers
Expect more babies — fur and human — to live in rentals as newly formed households save for down payments and seek out affordable living situations.
Pet-friendly properties are expected to become the norm as property managers recognize that a majority of renters consider pets as family members. With 60% of renters having a pet — up from 46% before the pandemic — it’s not surprising that nearly half of renters surveyed by Zillow said they passed on a particular property because it was not pet-friendly.
And, as rentals become the first home for a growing number of families with babies and young kids, expect to see more amenities that cater to them.
“Already, we’re seeing a bump in the share of rental listings with ‘kids playground’ or ‘nanny room’” mentioned in the listing description,’’ says Olsen. “The run-up in home prices the past few years means that new households are likely to rent their first home.”
6. Americans will take it down a notch with smaller spaces
After several years of living large, Americans appear ready to scale things back on the home front. The trend can be summed up in a single word: Cozy.
What had become a euphemism for small or cramped is now a sought-after design trait, evidenced by the fact that for-sale listings that mention “cozy” jumped by 35% in 2024, according to a Zillow analysis of millions of home listing descriptions.
“Home buyers are embracing smaller, cozier spaces for affordability and sustainability, and rejecting the cavernous open floor plans and pandemic-era need for more and more space,’’ says Amanda Pendleton, Zillow’s home trends expert. “The ‘Great Room’ has been replaced by smaller, cozier, color-saturated rooms that serve a specific purpose, such as dens and dining rooms.”
The trend is driven mostly by cost — smaller homes tend to cost less, are usually cheaper to insure, don’t require as many furnishings, and are less expensive to heat and cool. Beyond cost, though, design trends seem to signal that people are ready to do some cocooning.