Zillow: Analysts Expect Home Prices to Grow Steadily Starting in 2024
Zillow, Seattle, said home prices nationally should bottom out in 2023, then return to a more normal growth rate.
Zillow surveyed economists and housing analysts for its Zillow Home Price Expectation survey. Respondents said they expect home prices to fall 1.6% through December, in part because affordability challenges still drag down demand for homes.
Starting next year, however, the panel foresees price growth picking back up, the report said, noting a consensus forecast of 3.5% per year on average through 2027–the same rate that prices grew in the relatively stable period from 1987-1999, before the housing boom and bust cycle in the 2000s.
“The housing market is resetting,” said Zillow senior economist Jeff Tucker. “Though we’re seeing early signs of renewed buyer interest early this year, prices should generally flatten out in 2023, helping buyers to catch up.”
Tucker noted the sheer number of people in the first-time homebuyer age range and a lack of inventory should limit price declines. “A return to more normal growth would be welcome after the rollercoaster ride that home prices have been on lately,” he said.
Zillow forecasts existing home sales will fall to 4.2 million in 2023, up slightly from November and December’s seasonally adjusted annual rate of sales, but lower than 5.0 million sales seen in full-year 2022.
New construction–also expected to see sales decline this year–will likely play an expanded role to meet the need for inventory, Tucker said. “Existing homeowners have been reluctant to list their properties and builders are giving buyers some significant financial incentives to help overcome affordability constraints,” he said.
Zillow said the panel expects mortgage rates to trend downward after the first quarter. Asked when rates for 30-year fixed loans will be highest between now and 2025, nearly two thirds pointed to first-quarter 2023. Second-quarter 2023 ranked a distant second at 22%, and subsequent quarters earned 6% or less. “Falling rates are far more helpful for affordability than falling home prices, at least at the scale of recent movements,” the report said.
Terry Loebs, Founder of Pulsenomics, said most experts now forecast an outright U.S. home price decline this year. “Although mortgage rates have moderated and are expected to remain close to the 6% level at year-end, the 2022 rate spike–and the record-high mortgage costs it ushered in–continues to shake home price expectations and market psychology,” he said.
The Mortgage Bankers Association expects mortgage originations to remain flat through 2023.
