Zillow’s 2025 Forecast: What It Means for Home Buyers and Sellers in Western WI and the Twin Cities

As we approach 2025, Zillow’s latest forecast has made waves across the housing market, providing valuable insights into what buyers and sellers can expect over the next year. While it’s easy to get lost in the numbers, what really matters is how these projections affect real estate activity in the Twin Cities and Western Wisconsin regions. Whether you're thinking about buying, selling, or just staying informed, understanding these trends will help you make the best decisions in today’s fluctuating market.

Home Values: Modest Growth Ahead

According to Zillow’s revised projections, home values are expected to increase by just 0.9% in 2025—significantly down from the previously expected 2.9%. This lower growth rate is a result of several factors, including higher-than-expected inventory levels and rising mortgage rates that have kept buyer demand in check.

For homebuyers in the Twin Cities and Western Wisconsin, this means you may not see a dramatic rise in home prices next year. However, with home values still expected to increase—albeit slowly—those looking to purchase in 2025 might find themselves facing slightly higher prices than what they would have paid in 2023 or 2024. If you're waiting for the perfect moment to buy, the time may be now before values increase further, even if it’s at a modest rate.

Sellers, on the other hand, may want to consider acting sooner rather than later. With a slower-than-expected rise in home values, you could find that waiting too long may not yield the profits you expect. Selling in a market where growth is limited could mean lower sale prices than anticipated, especially as other inventory options begin to surface.

Existing Home Sales: A Slow and Steady Rise

Zillow forecasts that existing home sales will increase slightly to 4.11 million in 2025. While this is an improvement from 2024, it still remains well below pre-pandemic levels. This trend is primarily due to continued high mortgage rates, which are keeping many potential buyers out of the market.

In the Twin Cities and Western Wisconsin, this means the competitive advantage for sellers might not be as strong as it was during the pandemic boom years. However, the slight rise in home sales in 2025 does suggest that motivated buyers will still be active—especially when the spring market arrives. If you’re selling, you can expect more listings to be available, and as competition increases, buyers may be more selective.

For buyers, the lower overall inventory could still create challenges, particularly in popular neighborhoods of the Twin Cities. If you’re looking to buy, expect to continue dealing with fewer options, especially in suburban areas where housing demand remains relatively high. It may be necessary to adjust your expectations in terms of price, location, or property features.

Mortgage Rates: The Lid on Buyer Demand

Mortgage rates are another factor weighing heavily on the housing market. Zillow’s forecast anticipates that mortgage rates will experience a slight decrease by the end of 2024, but this drop will likely be minimal. Even with a minor decline, rates will remain elevated compared to historical standards, which means buyers may still find themselves facing high monthly payments for a while.

For those considering buying a home in the Twin Cities or Western Wisconsin, this could mean limited affordability. Buyers who have been waiting for mortgage rates to return to pre-pandemic levels may need to adjust their expectations. Although rates are forecasted to slightly decrease, it’s unlikely that they’ll fall enough to drastically improve purchasing power.

On the flip side, sellers who are trying to capitalize on higher home prices should be mindful of the impact that these rates will have on their buyer pool. The combination of elevated mortgage rates and the smaller-than-expected growth in home values may result in fewer qualified buyers, leading to longer listing times and less aggressive bidding.

Rental Market: What’s Happening with Rent Prices?

As mortgage rates stay high and home purchases become more difficult for many, renting continues to be a viable option for a large portion of the population. Zillow forecasts a 3.7% increase in single-family rents and a 3.1% increase in multifamily rents in 2025. With construction of new apartments slowing down, the growth rates for both single-family and multifamily rents are expected to align more closely than they have in recent years.

If you’re in the rental market in the Twin Cities or Western Wisconsin, be prepared for rent increases in 2025. This could make renting a home or apartment less affordable, which might prompt more renters to reconsider their options or possibly look for more budget-friendly alternatives.

For investors or those looking to purchase rental properties, these higher-than-expected rent increases could indicate an opportunity for long-term investment, especially if you’re able to secure financing at more favorable terms than today’s high mortgage rates. However, be cautious of rising costs in the construction sector, which could impact the long-term viability of new builds.

A Look Ahead for Buyers and Sellers

If you’re planning to buy or sell in Western Wisconsin or the Twin Cities in 2025, it’s important to stay informed about these market trends. For buyers, the slow rise in home values and high mortgage rates will likely mean a continued challenging environment. While there may be slight relief in mortgage rates by the end of 2024, these shifts won’t be drastic enough to stimulate a dramatic surge in home sales.

Sellers, on the other hand, may need to adjust expectations in a market with limited growth potential. While existing home sales are expected to rise slightly, it’s unlikely that buyers will be rushing into the market as they have in previous years. The competition from new listings will keep home prices from soaring, making it essential for sellers to price their homes carefully to attract interest.

Whether you’re buying or selling, understanding the broader market conditions can help you make more informed decisions about when and how to engage in the process. In the fast-evolving real estate markets of the Twin Cities and Western Wisconsin, staying one step ahead of the trends can make all the difference.

If you're considering buying or selling a home in the Twin Cities or Western Wisconsin, we can help guide you through these uncertain waters. Reach out today to discuss how these market trends might affect your next move!