A few weeks later, of course, Pandemic housing boom begins to fadeFor each forecast since then, Zillow has cut its 12-month house price outlook. April, Zillow Revised downward to 14.9%. In May, Revised downward to 11.6%. In July, Revised downward to 7.8%. In August, Downward revision to 2.4%. In September, Downward revision to 1.2%.
But this week, Zillow finally stopped cutting its 12-month outlook. over the next 12 months, Zillow now expects US home prices to rise 1.4%..
Whenever a company like Zillow says ‘US housing market’ or ‘US housing prices’, they are talking about the overall view of the country. In each local housing market, and therefore in each neighborhood, the results can vary greatly. To better understand Zillow’s forecasts, let’s dig into the local housing market data. We start by looking at what happened to house prices this summer, then dig into Zillow’s regional forecasts.
Back in May, Moody’s Analytics chief economist Mark Zandy said: luck Rising Mortgage Rates and ‘Overvalued’ Home Prices Will drive the US housing market into a housing adjustmentThe housing correction is a time when the US housing market, with mortgage rates set at 3%, is heading towards equilibrium. In any market, it leads to a sharp decline in home sales.It will also bubble the market, according to Zandi. There is a risk of a housing price adjustment.
That’s exactly what we saw this summer. Home sales plummeted nationwide and markets in the western half of the country bubbled. There was also a decline in housing prices..
According to Zillow, 117 regional markets (see graph above) saw home price declines from May to August. In 36 of those markets he saw declines of 3% or more. Most often these markets fall into he one of two camps.which one bubbling boomtownLike Austin (down 7.4%) and Boise (down 5.3%) or they are high cost tech hubs. A bubbled market simply saw home values decouple From local fundamentals. Markets such as Seattle (down 3.8%) and San Francisco (down 7.8%) are particularly rate sensitive. A spike in interest rates will not only discourage buyers from luxury homes in San Francisco and Seattle, but it will also have a serious impact on tech jobs.
“Nationwide, affordability issues are pushing potential buyers to the sidelines. Of course, this disruption of demand is more pronounced in some markets than others. months” Write to Zillow Researchers.
House prices fell in 117 markets this summer, while house prices rose in another 779 markets. In East Coast markets such as Miami (up 4.1%) and Myrtle Beach, SC (up 4.5%), these gains were fairly strong. Simply put, this is not a one-size-fits-all slowdown.
Zillow expects house price corrections to continue in the western housing market in the final three months of 2022, albeit at a moderate pace. From May to August, home prices fell 4.4% and 7.1%, respectively, in markets such as Phoenix and Salt Lake City. Zillow expects home prices to fall 2% in Phoenix and remain flat in Salt Lake City between the end of September and the end of December (see chart above).
Overall, Zillow expects 118 regional markets to see home price declines in the last three months of 2022. House prices are expected to rise in 747 markets and remain flat in 29 markets.
Heading into 2023, Zillow expects the home price correction to lose momentum in some markets while gaining momentum elsewhere.
Markets such as Boise and Phoenix, where home prices have adjusted significantly this summer, are expected to see some recovery in 2023, Zillow expects.
Nationally, Zillow expects home prices to decline in 271 markets between September 2022 and September 2023, while 607 markets will see higher home prices and 19 markets will remain flat. stay.
Why Zillow Thinks Correction of house prices Shouldn’t it be national? In short, supply is tight.
“Recessed demand has pushed prices lower, but the housing market is not as tight as it used to be, but a shortage of homes for sale is supporting prices against further declines.” Write to Zillow Researchers“Active sales inventories increased steadily over the spring and summer, but are still nearly 40% below pre-pandemic levels.”
Soaring mortgage rates Not only have there been fewer homebuyers, but some sellers have been eliminated as well. Some sellers refuse to lower their price points.Others aren’t keen on abandoning fixed mortgage rates of 2% or 3%. “Lock-in effect”.
“This dynamic differs from previous housing market slowdowns that have led to price declines, and even if demand has fallen, sustained tight supply may protect the market from significant price corrections. , the Great Recession was accompanied/promoted by falling home prices due to an increase in new listings containing many defective items.” Write to Zillow Researchers.
To be clear, Zillow remains optimistic.
Research firms and banks are increasingly saying a big drop in house prices is still ahead. These include companies such as: goldman sachs, wells fargo, Morgan Stanley, Moody’s Analytics, capital economicsZonda, Zelman & Associates, fannie maeWhen John Burns Real Estate Consulting.
“The longer it is [mortgage] We think housing will continue to feel it and be in this reset mode as interest rates continue to rise.And there’s an affordable reset mechanism on that must happen now [home] price. So there are a lot of markets across the country where he expects home prices to drop by double digits,” said Rick Palacios Jr., director of research at John Burns Real Estate Consulting. luck.
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