After nearly two years of slowdown caused by soaring mortgage rates and affordability challenges, the U.S. housing market is showing signs of life again. In a surprising shift, the market is heating up as buyers return earlier than expected, mortgage applications rise, and inventory begins to improve.
According to a new report from Zillow, this resurgence in demand is not a temporary blip—the real estate platform expects momentum to build into 2025, driven by stabilizing mortgage rates and a renewed sense of urgency among buyers who spent months on the sidelines.
The Housing Rebound: What Changed?
Analysts say three major factors are fueling the buyer comeback:
| Driver of Demand | Impact on Buyers |
|---|---|
| Falling mortgage rates | Increases affordability and monthly budget power |
| Rising inventory | More options after historic supply shortage |
| Strong wage growth | Encourages first-time and move-up buyers |
After peaking above 8% in 2023, mortgage rates have eased closer to 6.5%–7% in late 2024, giving buyers new confidence. While affordability remains tight, a small drop in rates translates into hundreds of dollars in monthly savings, especially for mid-range homes.
Zillow: “Market Momentum Will Continue”
Zillow chief economist Skylar Olsen said the early revival signals a “thawing market” where buyers who had paused due to rate uncertainty are now making moves.
“We’re seeing renewed energy from both buyers and sellers. Shoppers are back sooner than we expected, and this momentum has staying power into next year,” Olsen noted.
Zillow reports:
- Home sales are climbing, up more than 6% month-over-month
- Search activity on Zillow has surged, especially in affordable metros
- New listings are increasing as homeowners adjust to the new rate reality
- Price cuts are more common, signaling more balanced negotiations
Hot Markets Are Rising Again
Zillow highlights several U.S. regions showing strong early rebounds—especially in affordable and growing metros:
| Top Rebounding Markets | State |
|---|---|
| Raleigh | North Carolina |
| Tampa | Florida |
| San Antonio | Texas |
| Indianapolis | Indiana |
| Phoenix | Arizona |
These markets attract both remote workers and budget-conscious families, many of whom are relocating from expensive coastal states.
The Return of Millennials and First-Time Buyers
For the first time since 2022, first-time homebuyers are returning to the market in significant numbers. Zillow says this group now accounts for 50% of mortgage applications, one of the highest levels in decades.
Why now?
- Rents keep rising faster than mortgage payments in many cities
- Wage growth has outpaced inflation for six consecutive months
- Down payment assistance programs are expanding
- Buyers believe prices will rise again—creating urgency
Housing Prices: Stabilizing, Not Crashing
Many buyers expected a housing market crash in 2023—but that never came. Instead, prices stalled then stabilized, and now are expected to rise modestly in 2025.
Zillow forecasts home values will climb 3–4% next year, led by Sun Belt cities and Midwest metros. However, expensive markets like San Francisco and Seattle may lag, with little price growth due to affordability limits.
Mortgage Lock-In Effect Is Fading
One of the biggest obstacles to housing supply has been the “rate lock-in” effect—where homeowners refused to sell because they didn’t want to give up their ultra-low 3% mortgages. But that’s changing.
Zillow says more homeowners are deciding to move anyway, driven by:
- Job relocation
- Family changes
- Remote work flexibility
- Retirement moves
New listings have increased 12% compared to this time last year, a key sign that inventory pressure is finally easing.
Headwinds Still Loom
While momentum is building, the recovery remains fragile. Analysts warn of three lingering challenges:
❗Mortgage rates could remain volatile
❗Housing affordability remains historically low
❗Supply is improving but still 40% below healthy market levels
Economists caution that buyers are returning, but they’re cautious—and sellers need to price competitively to attract offers.
The Bottom Line
The housing market is not crashing—it’s reawakening. After nearly two stagnant years, buyers are back, and Zillow says the best months of the housing cycle may still be ahead. While affordability challenges remain, the return of motivated buyers and improving supply signal a healthier, more active market heading into 2025.
For anyone waiting for the “perfect time” to buy or sell, that moment may be getting closer than expected.
