Zillow Home Price Forecast: US Prices To Dip

The U.S. housing market continues to evolve, prompting adjustments from economists monitoring its trajectory. Zillow has released its latest home price forecast, offering updated predictions for over 400 individual housing markets and the nation as a whole.

Early in the year, Zillow economists anticipated a modest 2.6% rise in U.S. home prices throughout 2025. However, market conditions, particularly a notable softening in the Sun Belt, have led Zillow to revise its outlook multiple times.

According to Zillow’s most recent data, the pace of U.S. home price growth has slowed significantly, currently showing just a 0.4% increase year-over-year. Looking ahead, Zillow now forecasts that U.S. home prices are likely to decline by 0.7% between May 2025 and May 2026.

A Shifting Market: More Options for Buyers

This forecast downgrade reflects changing dynamics on the ground. Zillow economists highlight a substantial increase in available homes. “With inventory up nearly 20% over the previous year, buyers had more options in May than at any time since July 2020,” they noted.

Despite higher sales activity, the balance of power is shifting. Sellers still outnumber active buyers, giving purchasers more leverage and time to make decisions and negotiate. Zillow’s own Market Heat Index, which scores markets based on factors like price changes, inventory levels, and how long homes stay listed, now rates the nationwide market as balanced. This marks a significant departure from the fiercely competitive, seller-friendly conditions of recent years. Buyer competition reached its lowest May level in Zillow’s records dating back to 2018.

Beyond slower price growth, Zillow also expects subdued sales volume, predicting only 4.1 million existing home sales in 2025. This would represent the third consecutive year of suppressed sales, far below the 5.3 million sales seen in pre-pandemic 2019.

Local Market Predictions: Where Prices Will Rise and Fall

While the national forecast points to a slight dip, the housing market remains highly localized. Zillow’s forecast reveals significant variations across the country’s 400+ markets.

More than two dozen of the 50 largest metro areas have seen home values fall over the past year, and nearly 26% of listings nationwide experienced a price cut – a May high in Zillow records. Homes are also taking longer to sell, averaging 17 days on market, four more than last year and close to pre-pandemic norms.

Among the 300 largest U.S. housing markets, Zillow predicts the strongest home price appreciation between May 2025 and May 2026 will occur in these areas:

Atlantic City, New Jersey: 3.4%
Kingston, New York: 2.7%
Knoxville, Tennessee: 2.6%
Pottsville, Pennsylvania: 2.5%
Torrington, Connecticut: 2.4%
Rochester, New York: 2.2%
Syracuse, New York: 2.1%
Fayetteville, Arkansas: 2.1%
Rockford, Illinois: 2.1%
Yuma, Arizona: 2.0%

Conversely, Zillow expects the weakest price performance, including significant declines, in these 10 markets:

Houma, Louisiana: -9.4%
Lake Charles, Louisiana: -8.9%
New Orleans: -7.2%
Alexandria, Louisiana: -6.7%
Lafayette, Louisiana: -6.6%
Shreveport, Louisiana: -6.4%
Beaumont, Texas: -6.2%
San Francisco: -5.5%
Midland, Texas: -5.3%
Odessa, Texas: -5.3%

Notably, Zillow expects home prices across most of Florida to remain relatively flat over the coming year. However, some market observers remain skeptical, pointing to a significant increase in active inventory and months of supply in Florida, which could signal potential price weakness already evident in current declines for single-family homes and condos in many parts of the state.

Recent data using Zillow’s raw Home Value Index for September also showed month-over-month price drops in 26 out of 28 major metros tracked, including significant declines in markets like San Francisco and those in Texas, highlighting that price softening is already occurring in many large urban areas, even if Zillow’s forecast for the next year projects only a slight national decline.

Underlying Factors Shaping the Market

Several intertwined factors are influencing these market shifts:

Affordability Crisis: Housing affordability remains a major concern nationwide. Many households, particularly renters, spend well over 30% of their income on housing, the benchmark for being “cost burdened.” While this burden varies geographically, prices have surged significantly since 2019, far outpacing inflation, making homeownership increasingly challenging for many. High interest rates further exacerbate affordability by increasing monthly mortgage payments, leading some buyers to stay on the sidelines.
Inventory Dynamics: While active listings are rising from pandemic lows, overall housing supply remains constrained compared to historical levels. High mortgage rates have created a “lock-in” effect, discouraging existing homeowners with low rates from selling and listing their homes, which limits the inflow of certain types of inventory.

Changing Needs & Lifestyles: Counterbalancing affordability pressures are evolving living trends. Multigenerational living is experiencing a significant comeback, driven by cost savings, the need for elder or childcare, and the impact of the pandemic. This trend is increasing demand for larger homes or properties with flexible layouts. Similarly, some retirees are opting against downsizing, preferring larger homes to accommodate family visits, hobbies, or potential caregiving needs, rather than reducing space. These demographic shifts influence demand for specific types of properties in different areas.

In summary, Zillow’s latest forecast points to a slight cooling of the U.S. housing market with a projected national price dip over the next year. This reflects a shift towards a more balanced environment with rising inventory and increased buyer power. However, this national picture masks crucial local variations, with some markets expected to see continued modest appreciation while others face notable price declines, all influenced by the complex interplay of affordability, supply constraints, changing demographics, and broader economic factors.