Zillow's 2025 Home Price Forecast and Housing Market Trends

Overview

• Zillow has reduced its 2025 home price forecast to 0.6% growth nationwide.
• Initial forecast was nearly 3%, and has been cut two months consecutively.
• Declines are expected in nearly 250 metros across the U.S.

Key Drivers of Market Changes

• Rising Inventory Levels:

  • Inventory is up, creating a surplus which leads to price cuts.
  • 34% of single-family listings have seen price cuts, the highest rate in over 10 years.
  • Pandemic boomtown states (Florida, Texas, Arizona, Nevada) seeing highest price cuts.

• Specific State Insights:

  • Arizona: 36% of listings have price cuts.
  • Florida: 31% price cut rate.
  • Georgia & Nevada: 24% price cut rate.

Buyer Demand and Home Sales

• Buyer demand is down; inventory and price cuts are up.
• National Association of Realtors reported February 2025 as the worst February for home sales in 14 years.
• Buyers face affordability constraints, with homes still overpriced despite cuts.

Current Market Dynamics

• Home Value Declines:

  • Zillow reports declines in six to seven states as of February 2025.
  • States with value drops include California, Arizona, Colorado, Texas, Georgia, Florida, Vermont, and Hawaii.

• Reventure Forecasts:

  • Predicts declining prices in about 20 states.
  • Notable downward trends in Florida (score of 36/100) and Texas (score of 38/100).

Regional Market Differences

• Mountain West and Pacific Northwest:

  • States like Colorado, Utah, Arizona, Oregon, and Washington seeing slowdowns.

• Stable and Increasing Markets:

  • Northeast and Midwest (e.g., Illinois and New York) are still experiencing price increases due to low inventory.

Economic Considerations for Price Declines

• Significant declines (20-30%) require accompanying recession and job losses.
• Previous housing crashes coincided with high unemployment rates and forced sales.

Economic Indicators

• Job Growth Trends:
  • Florida: 1.4% non-farm payroll growth.
  • Nevada: 0.9% growth, similar to pre-crash levels.
  • California: Flat job growth, similar to early 2008 pre-crash trends.

Conclusion

• While there is potential for significant price declines in certain markets, actualization depends on broader economic downturns and job losses.
• Current trends suggest a shift in favor of buyers, evidenced by increased inventory and price cuts in various U.S. markets.

Recommendations

• Buyers should assess their local market using data from tools like Reventure, which provides insights into market trends and forecasts.
• Utilize resources to determine whether to buy now or wait, considering regional variations.