Back in February, Zillow’s housing economists made a bold call that U.S. home prices had bottomed and would proceed to climb 0.5% over the next 12 months.
In the months preceding that call, U.S. home prices as tracked by the Zillow Home Value Index not only began to climb again but also reached a new all-time high. This uptick was propelled by the tailwind generated from tight inventory levels, which proved strong enough to overpower the headwind caused by the mortgage rate shock.
That U.S. house price rebound coincided with Zillow repeatedly revising its home price forecast upward. Its latest revision predicts that U.S. home prices will rise 6.5% between July 2023 and July 2024—up from the 6.3% call it made last month. For perspective, U.S. home prices as tracked by Case-Shiller have averaged a 5.5% annual increase since 1975.
“Limited for-sale inventory continues to push home prices upward even as mortgage rates remain elevated,” wrote Zillow housing economists. “Just over half as many homes were listed for sale in July compared to the same month in 2019, and 29% fewer new listings entered the market in July than what was typical this time of year prior to the pandemic. This shortage has buoyed competition for the homes that are for sale. Homes that went under contract (or “pending”) in July did so in 12 days, a week and a half faster than what was typical in 2018 and 2019.”
While Zillow economists expect national home prices to rise 6.5% over the coming 12 months, their forecast model predicts that 120 of the nation's 400 largest housing markets will see increases of 7.0% or greater over the next 12 months.
There isn't just one unifying factor; these 120 housing markets are located all over the country. They're spread over the West (like Santa Maria, Calif.), South (Tampa), Midwest (Indianapolis), and Northeast (Scranton, Pa.).
While Zillow thinks U.S. home prices have bottomed—something that economists at CoreLogic and the AEI Housing Center also believe—not every firm agrees. Firms like Moody's Analytics and Morgan Stanley think U.S. home prices have a little more to give up, and it will happen between now and the end of 2024.
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