Zillow: Home Values to Decrease by the end of 2025

Zillow just made a big shift because their latest housing market forecast is now calling for home values to decrease by year end. But don't mistake this for a repeat of 2008 because a national housing market crash is not on the horizon. However, there are also some markets in which they are predicting home values will still increase by year end. And of course, I'll share the other markets in which they feel or they're expecting home values to decrease by the end of 2025. That's why in this video, I'm going to share all the latest trends. And that, by the way, is looking at sales and home prices for the forecast, how that compares to years past, going back to actually the early 1990s. And before we get started, if you guys are looking for a real estate agent, whether you're looking to buy or sell home nationwide, check out my new I'll link you up with a great real estate agent. With that said, I appreciate you guys so much for joining me in today's video. And let's begin. I have so much to share. So here's Zillow's forecast. It says Zillow's latest forecast expects home values to trend downward through the end of 2025. I should clarify that based on the median sale price, home prices tend to decrease in the winter months. And of course, the increase in the spring home buying season. But I think they're kind of talking about something different because they are expecting that home values will be in the negative by year end. It also says that home sales will match 2024's levels, which is eye-opening given the fact that again, last year, 2024, we had a 29-year low in home sales nationwide. They also go on to say here, new listings of existing houses. In other words, people who are listing their house for sale are forecast to outpace sales. So new supply in the market, they're saying that that's actually going to outpace the demand side, which of course is sales, helping inventory to finish a year higher compared to last year. The increase in the number of homes for sale has been more pronounced in the West and South. I've gone over that in separate videos, Denver, Phoenix, Austin, Texas, much of the Southwest part of Florida, big increases of inventory compared to 2019. All right, so let's talk about the forecast for home values. Then we'll talk about prices. And I'll also share how this all compares to other websites such as realtor.com and Redfin and Fannie Mae as well. It says the typical U.S. home value now nearly flat compared to last year. So home values are fairly flat year over year, should remain under pressure ending the year 0.9% below where it started. So by the end of the year, they're forecasting that home values will be down by 0.9% compared to the end of 2024. That is not a drastic dip or not as a drastic dip compared to last month, because last month they expected a stronger pullback in prices. And the revision is likely due to the fact that sellers are pulling their houses off the market or we're not seeing enough new supply in the market. So new supply in the market is going down. And of course, a lot of homeowners or home sellers are also delisting their house for sale. In other words, they list their home for sale, they didn't get an offer, and therefore they just took it off the market. So let's jump to resiclubanalytics.com to look at Zillow's forecast for the major metros nationwide, because that's not included in their website here, Zillow's website, I should say. So here's a look at the biggest gains. Again, much of the Midwest and the Northeast where they have a lack of house for sale. Again, if you missed my other videos that I've been posting, we've been seeing a severe lack of house for sale in the Northeast, especially compared to 2019. And that is supporting home values in which home values are still rising. Whereas the Southwest of Florida, much of Texas, and parts of the Mountain West are experiencing big gains in the amount of house for sale, and therefore prices are actually going down. So the biggest increases are Milwaukee, Wisconsin, small gain up by 0.3%. And Hartford, Connecticut, we've been seeing this for years now, one of the biggest increases now up by 3.2%. This by the way, is according to Zillow, through July of 2026. In contrast, New Orleans down 5.8%, Austin, Texas, down by 3.5%. Phoenix, Arizona, only down by 0.6%. Las Vegas down by 0.2%. I should say this, I don't put a whole lot of weight into these numbers, because inventory in Las Vegas is up greatly. But they're expecting a small decrease down by 2.2%. Same goes for Phoenix. Denver as well has a big increase of inventory, yet they're still calling for prices to only decrease by 2.2%. In the Bay Area, San Francisco down by 4.1%. Santa Cruz down by 1.2%. San Jose down by 1.5%. In Sacramento, they're calling for a decrease down by 2.3%. That is the metro area, which is a very small area within the greater Sacramento area. And by the way, again, stay tuned because I'm going to share how the home price changes, how this compares to years past, their forecast, how it compares to the Great Recession and pre-COVID levels as well. Let's first talk about sales though, because they're now calling for existing home sales. This excludes brand new home construction, excluding new houses. Sales are paid to end this year at 4.09 million, a small increase up by 0.6% from 24. It's a downgrade from last month. Weaker than expected sales are likely to result on consumer finances that are increasingly under pressure, along with a more sluggish labor market. I will also add to this is that mortgage rates still remain very much elevated. The higher compared to last year, but they're more or less right now on par with the lowest levels since the beginning of this year, but higher compared to 24 this time. So having said that, here's what I did for you guys. And don't get scared by all these numbers. I'm just going to kind of break this all down. I pulled all these numbers here from the National Association of Realtors, except for the percentages. I just add that up myself. So I just kind of want to walk you through this to share how that this bit decrease in sales has not translated yet in a decrease in home values or home prices. So I'm looking at NARS, the National Association of Realtors, median sole price. So anyways, looking at 24, this is Zillow's forecast, 4 million, sorry, 4,090,000. That's our forecast. What happened last year was at 4.06 million. And again, like you guys probably all know, that's the lowest level since 1995. In other words, a 29 year low. Therefore, this small gain up by only 0.7% is more or less in line with basically a three decade low. Very, very close to that. Also, like I mentioned here, this represents a slight decrease from the forecast from just a few months ago. The last time I made this video, they were forecasting back then 4.2 million sales. Now it's at 4.09 million. However, like I mentioned, this would be a very small increase from last year. So it'd be very, very close to a three decade low. This is also about 1.25 million fewer compared to pre-COVID levels. So big picture, if we end the year at around 4 million sales this year, we would remain at very low levels for about three years in a row. Therefore, we would have around 3 million fewer transactions compared to the long run average, which is right here. The median number of home sales nationwide since the year of 1989 is just under 5 million sales. Yet, 23, basically 4.1 million. Same goes for 24. And basically, you'd be on par with the same levels this year at under 4.1 million. Therefore, over the past three years, we'd be missing around 3 million home sales total, which is pretty eye opening to say the least. One thing I really do want to mention, though, is that don't think that a low level of transactions is going to translate to a housing market crash. I think I said that right here. Yeah, a crash on a national scale, and we have that. We have to see supply would absolutely have to explode and demand will also have to fall as well. Just economics 101, right? Supply increasing greatly and demand at very low levels, causing prices of any asset to really go way down. Along with that, in my opinion, we probably have to see a sharp rise of unemployment as well. Having said that, I wouldn't be too surprised if we actually end the year this year negative compared to the end of 2024. But I don't think that's going to be a really big deal, given the fact that prices have absolutely skyrocketed ever since 2019. All right, let's talk about my thoughts regarding if sales decrease greatly, that is not going to necessarily translate to home prices going down. So here is this, I just kind of put this together for you guys, looking at the years in which prices or sales fell compared to the previous year, where prices still rose, right? So 1990, we saw sales decrease by 3.2% compared to 1989. Yet the median sole price from the National Associates Realtors, that rose by 2.6% from 1989. 1991, we saw the same thing. 1995, down by 0.9%, but prices rose by 3%. When I say prices, for this chart, I'm talking about the median sole price, not home values. In 2000, sales were flat, yet prices rose by 4.1%. And look at this, I mean, huge decrease in transactions in 2006 and 2008. That was coupled with the fact that inventory was absolutely skyrocketing though, right? So sales absolutely tanked those years, yet prices only fell in 2007, 2008, and 2009. So from 2006 through 2009, prices only decreased by about 25%. Yet look at this though, before the Great Recession, the month supply was around 4.5 months to about 4.8 months. Then once we hit 2006, it increased big time to 6.5 months, 8.9 months in 07, and it peaked in 08 at a staggering 10.4 months supply. And the general rule that we've all been taught is that a balanced housing market is around four or five months supply. Anything above that is the buyer's market in which buyers have an advantage over home sellers. And just historically speaking, inventory has been less than five months supply. But once we hit 6.5 or over five months supply, it was a buyer's market in which buyers had an advantage over home sellers. So again, less than five months in general, a seller's market, more than five months supply, let's just call it a buyer's market. So the high level of supply really continued through 2011. And that elevated levels of inventory really was through 2011. Yet the only years in which prices decreased were 07, 08, 09, and 2011. So big picture regarding this, one of the reasons why prices absolutely cratered is due to the fact that inventory was absolutely skyrocketing, not necessarily due to the fact that price or sales were actually going down. And same goes for 2010, 2014, 18, and of course, 22, 23, and 2024. So despite the fact in 23, sales fell by 18.7%, prices still rose by 0.8%. So because now we all know that the price of any asset has to do with supply versus demand, looking at the month's supply right now, and this by the way, is for the end of July this year, which is the most recent data we have from NER, is at 4.6 months, which obviously pales in comparison to the Great Recession. All right, so how is this all compared to other companies and their predictions for 2025? So Zillow again, to summarize, sales to be at 4.09 a very small increase compared to the 29-year low we had last year, and prices increased by 0.9%. This is actually down, but it actually is an improvement compared to the forecast that was published in May. Back in May, they're forecasting that home values were going to decrease down by 1.9%. Now their forecast is down by only 0.9%. Redfin and realtor.com generally post their housing market forecast at the end of the year. So this is forecasted, I think it was in December of 2024. Both of them were calling around 4.1 million transactions. Redfin gave a range of 4.1 to 4.4, and prices increased by 4% according to Redfin and 3.7% according to realtor.com. Now Fannie Mae, they actually just announced this, I think it was about a week ago. They were also predicting that sales will be at 4.09 million, which is actually a deceleration though, because back in, I think it was like three months ago. Yeah, like I said here, they were predicting 4.2 million sales. Now it's less than 4.1 million. Fannie Mae is also predicting that home prices will increase by 2.8%. Something I should say here, I mentioned this in my comment here, is that this is not necessarily comparing apples to apples because home prices, Zillow uses their home value index. Redfin, realtor.com are using the median sole price, yet Fannie Mae is using their own home price index. So it's not necessarily comparing apples to apples. In any case, so Fannie Mae is forecasting that prices will still increase though, but this is a deceleration though, compared to the forecast that was posted three months ago. Back then they were forecasting gain of 4.1% by year end. Now it's a small gain up by 2.8%. And like I mentioned, this is based on their HPI or their home price index. Now, before I share their forecast for rents nationwide, I want to share what happened regarding mortgage rates over the past one year to kind of give an idea about where we're headed. So I found this to be interesting because right now this is from Fannie Mae or sorry, Freddie Mac. And the most recent week we have from them is the week ended August 28th, which is today when I'm making this video. They said based on their survey, that the average 30 year fixed rate is at 6.56%. This is higher compared to one year ago. Back then we're at 6.35%. However, if you guys recall, look what happened in the last three months of 2024. We went from basically a rate at 6.1% and then end of the year at around 6.9%. So a big increase of rates that we saw last year. This year, we've been seeing this downward trend because if you look at the mortgage news daily, which has a daily survey, they surveyed lenders nationwide, not my rates, but they survey rates nationwide for people looking to buy their primary residence. They have a great credit score. They're putting 20% down based on their data at 6.5%. That's basically the lowest rates we've had all year. So will we have a similar situation in which rates increase or will rates continue to fall, which of course may help spur activity. So what do you guys think is going to happen by year end? I actually would love to hear from you guys. I would expect that if interest rates fall further, let's just say they get to the low 6% range by year end, that we actually could see a recovery compared to the year prior when rates were absolutely skyrocketing. However, I also do expect that housing affordability constraints, which also will put a downward pressure on home sales in the near term because we're not seeing a huge decrease in home prices nationwide. But what do you guys think? And of course, if you guys want a real estate agent referral, then check out my website. Of course, that is realestateteamfinder.com. Can't talk, not enough sleep last night. Hope you guys had an awesome day. Thank you everyone for joining me. Please like and subscribe and we'll see you next video.