In a surprising turn of events, Zillow’s bold prediction in February that US home prices had hit rock bottom and would experience a modest 0.5% climb over the next year has taken an unexpected twist. The months following this declaration witnessed not only an impressive resurgence in home prices but also an unprecedented new all-time high.
This remarkable rebound, largely attributed to limited inventory levels, has surpassed the challenges posed by mortgage rate fluctuations. The rebound in US home prices, as indicated by the Zillow Home Value Index, has been nothing short of astonishing. This resurgence gained momentum due to the powerful influence of scarce inventory, which managed to overpower the dampening effect of the mortgage rate shock.
Interestingly, this resurgence led Zillow to revise its home price forecast multiple times, with the most recent projection foreseeing a significant 6.5% rise between July 2023 and July 2024—a notable increase from the 6.3% forecast made just last month.
Providing context to this forecast, Zillow highlighted that US home prices, as tracked by Case-Shiller, have historically experienced an average annual increase of 5.5% since 1975. The driving force behind this continued escalation is the persistently limited inventory for sale. In July, the number of homes listed for sale was roughly half of what was observed in the same month back in 2019.
Moreover, new listings entering the market in July were 29% lower than the pre-pandemic norms for this time of year. This scarcity has led to intensified competition among buyers, with homes going under contract in a mere 12 days—far quicker than the norm observed in 2018 and 2019.
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Zillow’s Varied Forecast for US Housing Markets
Zillow’s predictions reveal a diverse pattern across housing markets. The forecast model suggests that 120 out of the 400 largest housing markets in the US are poised for a 7.0% or higher increase over the next year. These markets span regions across the West, South, Midwest, and Northeast, highlighting the widespread nature of this trend.
Notable examples include Santa Maria, California, Tampa, Florida, Indianapolis, Indiana, and Scranton, Pennsylvania. While Zillow’s optimistic outlook indicates that US home prices have likely reached their lowest point—a sentiment shared by CoreLogic and the AEI Housing Center—other prominent entities hold differing views.
Moody’s Analytics and Morgan Stanley project that there might still be some room for home prices to adjust downwards, a movement they anticipate will occur between now and the conclusion of 2024.
In an ever-evolving housing landscape, the resilience of US home prices stands as a testament to the interplay of market forces, inventory scarcity, and shifting economic dynamics. Zillow’s forecast, while bearing an optimistic tone, underscores the complexities of predicting home price trends.
With contrasting views persisting among experts, the trajectory of US home prices remains an ongoing storyline to watch, with the diverse real estate market showcasing a blend of opportunities and uncertainties.
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Source: Yahoo Finance
