In April 2025, Zillow released its latest housing market forecast, predicting a 1.7% decline in U.S. home prices by March 2026. This shift, driven by rising inventory and persistent affordability challenges, marks a pivot from earlier growth projections and tilts the market toward buyers. With mortgage payments now consuming 35.3% of median household income, regions like the Southwest may see relief, while others face varied outcomes. Here’s how this forecast could reshape the housing landscape for buyers, sellers, and investors across the U.S
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Zillow Home Prices: A Cooling Market Takes Shape
Zillow’s April 2025 forecast projects a 1.7% drop in U.S. home prices between March 2025 and March 2026, according to the Zillow Home Value Index. This contrasts with earlier expectations of modest growth, reflecting a market responding to increased housing supply and affordability pressures. As of March 2025, the typical U.S. home value was $359,741, up 1.2% year-over-year, per Zillow’s data. However, mortgage payments now account for 35.3% of median household income—well above the 30% affordability benchmark—straining buyers nationwide. “More inventory should shake loose in 2025, giving buyers a bit more room to breathe,” said Skylar Olsen, Zillow’s chief economist, in a recent statement. This influx of homes could ease the market’s long-standing supply crunch, signaling a buyer-friendly shift.
Regional Winners and Losers
The national forecast masks significant regional disparities. Zillow identifies the top 10 metro areas for price appreciation, led by Atlantic City, NJ (+2.4%), Kingston, NY (+1.9%), and Rochester, NY (+1.8%), where inventory remains constrained, per Zillow’s metro-level data. Conversely, the bottom 10 markets face steep declines, with Houma, LA (-10.1%), Lake Charles, LA (-8.9%), and New Orleans, LA (-7.6%) hit hardest due to oversupply. These trends hinge on local inventory dynamics: high-supply regions like the Southwest and Gulf Coast are poised for price drops, while low-inventory areas, particularly in the Northeast, may hold steady or grow. This patchwork outlook underscores the uneven impact of rising inventory across the U.S.
Expert Takes: Agreement and Pushback
Zillow’s forecast has sparked mixed reactions among industry experts. Lance Lambert, co-founder of ResiClub, partially aligns with Zillow’s Sun Belt outlook but critiques its pessimism elsewhere. “Zillow is too bearish on many markets in the Northeast and Midwest, where active inventory still remains well below pre-pandemic 2019 levels,” Lambert noted in a ResiClub analysis. Other factors, like mortgage rates—projected to hit 6.5% by year-end according to Fannie Mae’s forecast—could amplify or mitigate Zillow’s predictions. Economic policies, such as potential tariffs or inflation controls, may also sway affordability and demand. While Zillow’s data-driven approach is robust, experts emphasize that regional nuances and macroeconomic shifts could alter the trajectory.
What It Means for You
Zillow’s forecast carries practical implications for key market players:
- Buyers: Rising inventory and falling prices could offer more choices and negotiating leverage, especially in oversupplied regions like the Southwest. Yet, with mortgage rates climbing to 6.5% by year-end, per Fannie Mae, financing costs may temper these gains.
- Sellers: Increased competition from a 4.3-month inventory supply—still below the 5–6 months of a balanced market, per Zillow’s metrics—may pressure sellers to cut prices, particularly in high-supply areas like Louisiana. Sellers in tight markets like the Northeast could fare better.
- Investors: Opportunities beckon in growth markets like Atlantic City, NJ, while declining areas like Houma, LA, warrant caution. Investors should weigh local supply trends against broader economic signals.
These shifts highlight a market in transition, with inventory as a pivotal force.
Conclusion
Zillow’s 2025 housing forecast paints a picture of a cooling, buyer-leaning market, driven by a 1.7% price drop and rising inventory. Yet, with mortgage rates nearing 6.5% and regional variations in play, outcomes will differ widely. Buyers may find relief in increased options, while sellers and investors face a more competitive landscape. As Skylar Olsen observed, “More inventory should shake loose in 2025,” per Zillow’s analysis, but economic factors like rates and policy shifts could steer the market in unexpected directions. Stakeholders should track inventory trends and macroeconomic signals closely as the year unfolds.
