According to Zillow economists, US home prices are predicted to surge by over 6% in the next year. The firm forecasts a 5.8% increase in home prices by the end of 2023, and a further 6.5% increase by July 2024. This would result in the median US home price rising to $370,754.
These predictions contrast with those of other firms, such as Realtor.com and Redfin, which are expecting slight declines in home prices by the end of the year. Realtor.com predicts a 0.6% decline, while Redfin expects a 4% decline.
Zillow attributes its bullish prediction to the shortage in housing inventory, which has driven up home prices over the past year. The available supply of homes on the market has been reduced by 50% since July 2019. Limited inventory, combined with elevated mortgage rates, has contributed to the upward pressure on home prices. Zillow's researchers anticipate that the tight inventory conditions and high mortgage rates will continue to limit sales volume in the coming months.
High mortgage rates have strained housing affordability, discouraging existing homeowners from listing their properties for sale. This has led to an imbalanced housing market, with affordability unlikely to improve until mortgage rates decrease significantly. Industry experts suggest that rates would need to fall to the 5% range in order to unlock more inventory.
Given the ongoing affordability crisis, Zillow is offering prospective homebuyers the option to pay just a 1% down payment on newly purchased homes. This may provide some relief to buyers struggling with the high cost of homeownership.
In conclusion, Zillow's economists predict a significant surge in US home prices over the next year, driven by a shortage in housing inventory and elevated mortgage rates. This forecast contradicts the predictions of other firms, which expect slight declines in home prices. The affordability crisis is expected to persist until mortgage rates decrease further.