There’s only one real estate bull left standing: Zillow.
Not only does Zillow disagree with the “home price correction” narrative, the Seattle-based real estate listing site thinks the pandemic housing boom has some remaining gas in the tank. Between July 2022 and June 2023, Zillow predicts U.S. home prices will rise another 7.8% (scroll down to find forecast at the metro level). This is well above the average annual appreciation of 4.6% recorded since 1987.
Research groups like Zelman & Associates, Capital Economics and John Burns Real Estate Consulting all believe the country is getting closer to falling house prices. They say soaring mortgage rates have pushed the “overvalued” US housing market over the edge. This begs the question: why does Zillow remain so bullish?
Much of it comes down to supply. Between the first week of January and the first week of July, inventory levels on Zillow.com jumped 18%, from 546,800 listings to 642,800 listings. Even with this jump, we are still in a historically tight market. Inventory remains 54% lower than the 1.4 million active listings we had in July 2019. As long as inventory remains scarce, existing home prices are unlikely to fall.
That said, this latest forecast from Zillow marks another downward revision. Faced with weakening housing data, Zillow cut its year-over-year home price outlook from 9.7% to 7.8%. This is the fourth month in a row that Zillow has issued a downward revision.
“The housing market is rapidly rebalancing from what had been arguably the strongest sellers’ market in decades, with inventory rising and competition for homes diminishing in the face of significant housing issues. affordability. The rebalancing is likely to continue given the current macroeconomic headwinds,” write the Zillow researchers.
Nationally, Zillow forecasts home price growth of 7.8% over the next 12 months. But depending on the region, it will vary a lot.
Of the 911 regional real estate markets analyzed by Zillow economists, 906 are expected to see house prices rise between July 2022 and June 2023. Zillow expects only five markets to see year-over-year declines other. The largest predicted decline being 6.4% in Greenville, Miss.
Over the coming year, Zillow predicts that 741 markets will see house price growth of 5% or more. While 136 markets are expected to see year-over-year house price growth of 10% or more. This includes markets like Athens, Georgia (projected growth of 10.3%); Durango, Colorado (10.3%); Grenada, Mississippi (10.3%); Fort Myers, Florida (10.2%); and Morristown, Tennessee (10.2%).
Keep in mind that some of this house price growth is already priced in. On the data collection side, real estate transactions are lagging behind. Many of the home sales that will be final in August and September actually took place in June and July.
Moody’s Analytics chief economist Mark Zandi disagrees with Zillow’s optimistic outlook.
Over the coming year, Moody’s Analytics predicts that US house prices will remain unchanged. That would mark the lowest level of home price appreciation since 2011. But that’s nationwide. Regionally, Moody’s Analytics predicts that about half of the country will experience a decline in house prices.
Earlier this week, Fortune has contacted Moody’s Analytics for access to its latest proprietary housing analysis. Researchers at the financial intelligence firm calculated the likely development of house prices in more than 400 regional real estate markets between the fourth quarter of 2022 and the fourth quarter of 2024.
Among the nation’s 414 largest real estate markets, Moody’s Analytics predicts that 204 regional real estate markets will experience rising house prices over the next two years. Meanwhile, Moody’s Analytics expects 210 markets to see house prices fall. The steepest declines, according to Zandi, will come in housing markets like Boise and Austin, which are significantly “overvalued” relative to underlying economic fundamentals. In the event of a recession, these markets could see prices fall by 15 to 20%.
Want to stay up to date on the US real estate market? Follow me on Twitter at @NewsLambert.
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