Zillow’s Housing Forecast Dramatically Shifted Downward.

Back to a Buyers Market?

 

• Zillow Revised Housing Forecast: Zillow revised its 2025 and 2026 home price forecast, showing increased optimism nationally (0.4% increase) but pessimism in specific cities and states.
• Declining Buyer Demand: Pending home sales are significantly down, with buyer demand at its lowest level ever, even lower than during the 2008 housing crisis. This low demand, not necessarily mortgage rates, is the primary driver of price drops.
• Falling Home Prices: Home prices are dropping in approximately half of the US, particularly in the South, Sun Belt, Mountain West, and parts of California. While some areas see small declines (2-5%), others experience more significant drops (10-30% on individual listings).
• Zillow’s Pessimistic Outlook for Certain Cities: Zillow forecasts price declines in several cities, including those in Louisiana, Texas, San Francisco, Austin, Sacramento, Denver, Honolulu, Portland, Northport, Florida, and Cape Coral, Florida, and Washington D.C.
• High Prices Remain a Barrier to Buyers: Even with price drops in some areas, overall home prices remain historically high, hindering buyer demand. The speaker argues that high prices, not interest rates, are the main obstacle.
• Regional Disparity: While many areas experience price declines, some regions, like the Northeast (New York, Illinois), show continued price appreciation.
• Seller Disconnect: Many sellers are overpricing their homes, failing to recognize the current market conditions, leading to extended listing periods and unsold properties. The speaker advocates for realtors and sellers to use market data to price listings appropriately.
• Impact of Baby Boomers: The speaker anticipates increased housing inventory due to baby boomers aging out of their homes, which will likely further impact market dynamics in the coming years.
• Data-Driven Decision Making: The speaker strongly recommends using data and forecasts to make informed decisions on buying, selling, and investing in real estate.

The U.S. housing market is entering a critical phase as buyer demand collapses to record lows while Zillow has revised its price forecasts for 2025–2026. The market is no longer moving uniformly — while states like Florida, Texas, and California are showing declines, areas in the Northeast and Midwest are still appreciating.

This report provides an in-depth look at:

• Zillow’s updated national and local forecasts.
• Buyer demand trends and pending home sales data.
• Regional differences between declining Sun Belt markets and resilient Northeast/Midwest states.
• Real-world examples of price drops.
• Practical takeaways for buyers, sellers, and investors.

The U.S. housing market is entering a critical phase as buyer demand collapses to record lows while Zillow has revised its price forecasts for 2025–2026. The market is no longer moving uniformly — while states like Florida, Texas, and California are showing declines, areas in the Northeast and Midwest are still appreciating.

This report provides an in-depth look at:

• Zillow’s updated national and local forecasts.
• Buyer demand trends and pending home sales data.
• Regional differences between declining Sun Belt markets and resilient Northeast/Midwest states.
• Real-world examples of price drops.
• Practical takeaways for buyers, sellers, and investors.

Section 1: Buyer Demand Collapse

• Pending home sales index (NAR, July 2025): 72, down from a pre-pandemic norm of 106.
• Contract signings are down 32% vs. pre-pandemic and 45% vs. 2021 peak.
• Demand today is lower than during the 2008 housing crash, the weakest level on record.
• 15% of contracts canceled in July (Redfin).
• Only 16% of realtors expect improvement in the next 3 months.

Key Point: Even after Fed rate cuts in 2023–24, demand has not recovered. High home prices, not mortgage rates, remain the core barrier.

Section 2: Zillow’s Forecast Revisions

• National Forecast: Zillow now expects +0.4% growth through July 2026 (upgraded from negative).
• Regional Declines Projected:
  • San Francisco: –4%
  • Austin, TX: –3.5%
  • Sacramento, CA
  • Denver, CO
  • Honolulu, HI
  • Portland, OR
  • Northport & Cape Coral, FL
  • Washington, D.C.

Observation: Zillow is typically more optimistic than other forecasters. If even Zillow projects declines, these areas are under serious pressure.

Section 3: Real-World Price Drops

• Venice, FL Example:
  • Bought in Dec 2022: $840,000.
  • Listed in 2024: $670,000 (already a loss).
  • Sold July 2025: $585,000.
  • 31% decline ($260K loss).
• St. Petersburg, FL:
  • Certain zip codes down 12–17% in a single year.
  • Some sellers still list far above market (e.g., $799K listing purchased for $512K in 2023).

Lesson for Buyers: Aggressive offers and patience can uncover deep discounts on individual listings, even if averages show smaller declines.

Section 4: Florida & Sun Belt Weakness

• Florida: Down 5% statewide YoY; hardest-hit state in July 2025.
• Texas & Mountain West: Also in decline, including Austin and Denver.
• California: San Francisco and Sacramento forecasted for continued declines.

Underlying Cause: Inventory surges and lack of demand are forcing sellers to cut prices.

Section 5: Northeast & Midwest Strength

Contrary to Sun Belt declines, several Rust Belt and Northeast states are appreciating:

• New York: +4.4% YoY.
• Illinois: +3.5% YoY.
• Wyoming: +5.2% YoY.

Zillow’s Strongest Growth Forecasts (2025–2026):

• New Haven, CT
• Hartford, CT
• Syracuse, NY
• Reading, PA
• Allentown, PA
• Rochester, NY
• Trenton, NJ

Why? These markets are more affordable and have less speculative inventory compared to the overheated Sun Belt.

Section 6: Local Forecast Insights

• Nashville Example:
  • Downtown forecast: –10% (from $659K → $593K).
  • Wealthy suburbs (Forest Hills, Green Hills): –1.7%.
  • Local differences can mean tens of thousands saved by choosing the right neighborhood.

Takeaway: Buyers and investors must analyze zip-code-level data instead of relying on state or city averages.

Section 7: Seller Mispricing & Market Psychology

• Many sellers are anchored to pandemic-era highs and still list too high.
• Homes often sit for 3–4 months without selling, forcing cuts.
• Realtors face challenges convincing sellers to accept current market realities.

Section 8: National Market Deflation Trend

• 14 states + D.C. down YoY (including FL, TX, AZ, HI, CA, NC, SC, OR, TN).
• 27 states down MoM (as of July 2025).
• Declines range from 2–5%, with localized double-digit drops.

Issue: Small declines don’t yet make homes affordable, so demand stays low.

Section 9: Why Rates Don’t Matter (Yet)

• Mortgage rates at ~6.7% are historically normal (long-term avg 6–7%).
• Inflation-adjusted home prices are at record highs — worse than 2006 bubble.
• Conclusion: High prices, not rates, are the main obstacle to demand recovery.

Section 10: Action Plan for Buyers, Sellers, Realtors

For Buyers:

• Target oversupplied markets (Florida, Texas, California) for the best deals.
• Use local forecasts to negotiate 5–10% below asking in declining areas.
• Stay patient — more cuts likely through late 2025.

For Sellers:

• Price realistically to avoid long listing times.
• Study local data — overpricing guarantees stagnation.

For Realtors & Investors:

• Use forecasts as objective data when guiding clients.
• Focus on resilient Northeast/Midwest markets for long-term stability.

1. Buyer demand is at record lows, worse than 2008 crash levels.
2. Zillow revised national forecast slightly positive (+0.4%), but projects local declines in major Sun Belt and coastal cities.
3. Florida is the hardest-hit state, with some zip codes down 12–17% YoY.
4. The Northeast and Midwest remain strong, with appreciation in NY, CT, PA, and IL.
5. Local conditions vary dramatically — Nashville’s downtown vs. suburbs show a –10% to –1.7% split.
6. Sellers remain disconnected from reality, often overpricing.
7. Mortgage rates are not the main problem — record-high prices are.
8. 14 states + D.C. down YoY, 27 states down MoM.
9. Deep individual listing discounts (30%+) are possible for aggressive buyers.
10. The market remains highly bifurcated, with Sun Belt declines and Northeast/Midwest resilience.

@boydthebroker This is the new real estate market.🤓 Price reductions and buyers backing out.🤔Houses are still selling…it is a healthy real estate market…but you have to be competitively priced and be prepared to 😬 accommodate a buyer during the escrow process.🙋‍♂️ #boydthebroker ♬ original sound – Boyd The Broker Real Estate