According to Zillow’s revised forecast, house prices in 2023 are at the top of your local housing market

Of course, just a few weeks later, The housing boom began to happen. Every forecast since then, Zillow has cut its 12-month home price outlook. In April, Zillow modified it down to 14.9%. In May, it was adjusted down 11.6%. In July, it was revised down to 7.8%. In August, it was revised down to 2.4%. In September, it was revised down to 1.2%.

This week, however, Zillow finally stopped revising its 12-month outlook to the downside. In the next 12 months, Zillow now predicts US home values ​​will rise 1.4%.

Whenever a company like Zillow says “US housing market” or “US home prices”, it is talking about an aggregate view of the country. Within each housing market in the area — heck, in each neighborhood — the results can vary significantly. To better understand Zillow’s forecast, let’s dig into the housing market data in the region. We’ll start by looking at what happened to home values ​​this summer and then we’ll dive into Zillow’s regional projections.

Back in May, Moody’s Analytics Chief Economist Mark Zandi told Luck that mortgage rates rise with “overvalued” home prices will push the US housing market into a housing correction. A housing correction is a period in which the U.S. housing market — already priced at 3% mortgage rates — will work toward equilibrium. In every market, that would lead to a sharp drop in home sales. Zandi says, it will also make the market bubble at risk of adjusting house prices.

That’s exactly what we’ve seen this summer: Home sales plummet across the country and markets freeze in the western half of the country. House prices are also falling.

According to Zillow, 117 markets in the area (see chart above) saw a drop in home values ​​from May to August. In which, 36 markets had a decrease of more than 3%. For the most part, these markets fall into one of two camps. Or they bubbly jackets—Like Austin (7.4% down) and Boise (5.3% down) – or they are high-cost tech hubs. The frozen market simply saw family values ​​come apart from local fundamentals. Markets like Seattle (down 3.8%) and San Francisco (down 7.8%) are particularly sensitive to exchange rates. The spike in interest rates not only deterred luxury homebuyers in San Francisco and Seattle, but also had a serious impact on jobs in the tech sector.

“Across the country, affordability challenges have pushed potential buyers aside. Of course, this demand destruction is more evident in some markets than others. next month,” write researchers Zillow.

While 117 markets saw home values ​​fall this summer, another 779 saw home values ​​rise. In East Coast markets like Miami (up 4.1 per cent) and Myrtle Beach, SC (up 4.5 per cent), these gains were quite strong. Simply put: This is not a one-size-fits-all slowdown.

Over the final three months of 2022, Zillow expects home price corrections to continue in Western housing markets, albeit at a milder pace. From May to August, markets like Phoenix and Salt Lake City saw home values ​​fall 4.4% and 7.1%, respectively. From late September to late December (see chart above), Zillow expects home values ​​to drop 2% in Phoenix and stay flat in Salt Lake City.

In total, Zillow expects home values ​​to decline in 118 markets in the region in the final three months of 2022. It expects 747 markets to post increases in home values ​​and 29 to remain flat.

In 2023, Zillow predicts the home price adjustment will lose its appeal in some markets while it picks up in others.

In markets like Boise and Phoenix, which have seen strong home price corrections this summer, Zillow expects prices to recover slightly in 2023: Over the next 12 months, Zillow projects House prices will increase 4.3% in Boise and 1.7% in Phoenix.

Nationally, Zillow expects 271 markets to post declines in home values ​​between September 2022 and September 2023 — while 607 markets post increases and 19 remain flat. original.

Why does Zillow think fix house price won’t go national? It dropped due to tight supply.

“Falling demand has pushed prices down, but while the housing market isn’t nearly as tight as it used to be, the lack of listings is providing some support for prices against further declines.” . write researchers Zillow. “Active inventory for sale increased steadily throughout spring and summer but are still nearly 40% below pre-pandemic levels.”

Mortgage rates soar Not only has there been fewer homebuyers, but some sellers have been pushed aside. Some sellers refuse to reduce their prices. While others don’t want to give up their 2% or 3% fixed mortgage rates. Industry insiders are calling this phenomenon “lock effect”.

“This dynamic is unlike previous housing market downturns that have resulted in price declines and continued tight supply that could prevent the market from experiencing a significant price correction, even if demand has cooled. by an increase in new listings, including many tough sales,” write researchers Zillow.

Let’s be clear: Zillow remains on the optimistic side.

More and more research firms and banks predict the biggest drop in house prices is still waiting. That includes companies like Goldman Sachs, Wells Fargo, Morgan Stanley, Moody’s Analysis, Capital EconomicsZonda, Zelman & Associates, Fannie Maeand John Burns Real Estate Consulting.

“That long [mortgage] rates are still going up, our view is that housing will continue to feel that and have this reset mode. And the affordability reset mechanism now has to happen is on [home] price. And so there are a lot of markets around the country where we forecast a double-digit drop in home prices,” said Rick Palacios Jr., head of research at John Burns Real Estate Consulting. Luck.

Only CoreLogic and Mortgage Bankers Association agrees with Zillow that we won’t see US home prices fall year over year in 2023.

Want updates on the US housing market? Follow me on Twitter in @NewsLambert.

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