For years, Zillow was known for its generally upbeat view of the U.S. housing market. But that changed dramatically this month. According to housing analyst Nicholas Gerli of Reventure Consulting, Zillow has now released what he calls the “ultimate housing market SELL signal.” The platform cut its national home price forecast to -1.7% over the next 12 months, predicting declines in every major metro area. That’s more than 700 cities expected to see price drops, a massive shift in tone from one of the biggest names in real estate data.
From Optimism to Bearish Forecasts
Zillow’s newly pessimistic outlook has stunned many in the industry. As Gerli explained in his YouTube breakdown, Zillow is typically optimistic, so this broad prediction of a downturn caught many off guard. San Francisco leads the pack with a forecasted 5.2% drop, but the correction is expected to reach almost every corner of the housing market. Gerli said this change in sentiment “should be a warning to all of you out there who were skeptical the housing market was in a downturn.”
Inventory Surge Is Driving the Shift
The driving force behind Zillow’s bearish shift, according to Gerli, is inventory. Over the past three years, the number of homes for sale has nearly tripled, returning to pre-pandemic levels. This surge in available homes is a strong signal that the housing shortage narrative is over. In March 2025 alone, 23% of sellers cut their asking prices – the highest rate of price reductions in a decade. “This is no longer a seller’s market,” Gerli warned. “It’s a rebalancing one.”
Key Markets at Risk: Florida, Texas, Colorado
While Zillow sees widespread price drops, Gerli highlights certain states that may be hit even harder. He points to Florida, Texas, and Colorado – all of which have seen major inventory spikes. His forecast predicts steep corrections in cities like Denver (-8.6%), Austin (-6.3%), Tampa (-5.8%), and Dallas (-6%). These drops might offer relief to potential buyers, but they also raise concerns about market stability in previously booming areas.
Buyers Still Face Affordability Roadblocks
Despite falling prices, buying a home is still out of reach for many Americans. Gerli dives deep into mortgage costs versus income ratios, showing how unaffordable homes remain even after price cuts. In California, for example, households spend an average of 61% of their income on mortgage payments, well above the historical average of 43%. In Texas, the ratio is lower at 33%, but that’s still way above its long-term average of 23%. “We’re not there yet,” Gerli said, making it clear that home values need to come down further before they’re in line with incomes.
Travis Spencer: “Zillow Is Always Wrong – Until Now?”
Over on the Real Estate Mindset channel, host Travis Spencer weighed in with a sharper tone. “Zillow is not always high. Zillow is not always low. But Zillow is always wrong,” Spencer joked. But even he admits that this time, Zillow’s forecast might be on point. The company recently revised its projection from a 6% gain to a 1.9% loss, a stunning swing that Spencer believes reflects a true turning point. “The housing market’s toxicity is catching up to it,” he warned.
Sellers Are Cutting Prices and Adding Incentives
Spencer also noted that 44% of sellers are now offering buyer concessions – almost the highest level on record. In addition, 23.5% of listings had price cuts in March. Even though mortgage rates dropped slightly this year, buyers aren’t jumping in. Why? As Spencer puts it: “Prices are still freaking through the roof.” Buyers have more choices now, but many still feel priced out of the market. He called these listings “fraud debt bubble assets,” harshly criticizing inflated values in markets like Phoenix, San Antonio, and Tampa.
Rising Inventory Exposes Weak Demand
According to Spencer, the inventory spike is exposing the housing market’s soft underbelly. In states like Florida and Texas, inventory levels have exploded, surpassing even pre-pandemic levels. Florida’s surge has been so fast that Spencer said Zillow might need to “adjust the charts” to fit all the new listings. New York, by contrast, hasn’t experienced this same inventory balloon, which is why Spencer believes it may avoid the worst of the downturn.
Not All Markets Are Equal
Both Gerli and Spencer emphasize the importance of hyper-local analysis. Just because the national forecast is negative doesn’t mean every city is going down. Gerli even predicts price growth in areas like New York, Chicago, and Philadelphia, where inventory remains tight. In fact, he believes that some Rust Belt cities are undervalued or fairly priced and might hold their value better. That being said, Knoxville, TN, was flagged as the most overvalued city in the country, with prices 36% above what fundamentals would justify.
A Market Full of Contradictions
Even in a downtrend, the housing market remains strange. Zillow’s data shows that 24.6% of homes still sold above asking price last month, even as record price cuts occurred. Meanwhile, rents are climbing, making life even harder for potential buyers. Asking rents hit over $2,000 per month nationally, and concessions, like free rent months, are hiding the true cost for many tenants. Spencer calls this the “bifurcation” of the market, where buyer behavior no longer matches typical expectations.
Is It a Bubble? Gerli Says Yes
Nicholas Gerli doesn’t hold back – he calls this the biggest housing bubble in U.S. history. Based on inflation-adjusted home prices and home value-to-income ratios, Gerli argues we’ve gone well beyond the 2006 levels that preceded the last crash. “This isn’t opinion,” he said. “This is math.” He encourages buyers to use metrics like overvaluation rate and mortgage payment to income ratio to determine when and where it’s safe to enter the market.
This Time, Data Wins Over Hype
It’s fascinating to watch Zillow, the name millions rely on, turn bearish in real-time. What’s most interesting isn’t just the numbers, but the change in tone from real estate voices like Gerli and Spencer. When even the cheerleaders start waving red flags, it’s time to listen. Their message is clear: Don’t buy just because you can – buy because it makes financial sense. And right now, in most markets, that’s not the case.
Looking Ahead: Be Smart, Be Patient
Whether you follow Gerli’s detailed market forecasts or Spencer’s no-nonsense commentary, the takeaway is the same: patience is power. Buyers who rush in now could face years of negative equity. Those who wait, study local trends, and learn the math could secure the deal of a lifetime. The housing market may be cooling, but the smart money is just warming up. Keep watching. The real correction might just be getting started.
Mark grew up in the heart of Texas, where tornadoes and extreme weather were a part of life. His early experiences sparked a fascination with emergency preparedness and homesteading. A father of three, Mark is dedicated to teaching families how to be self-sufficient, with a focus on food storage, DIY projects, and energy independence. His writing empowers everyday people to take small steps toward greater self-reliance without feeling overwhelmed.