Zillow’s crystal ball says that home prices won’t cool off anytime soon. In fact, they’re going to keep climbing into 2023, according to the real-estate data firm.
“Annual home value growth is likely to continue accelerating through the spring, peaking at 22% in May, before gradually slowing (to 17.8%) through February 2023,” Zillow says in a March 16 report. “More than 6.4 million total existing homes are expected to sell in 2022.”
Over the past 12 months, prices for existing homes are up 18.8%. That’s the largest price increase American home buyers have seen over a 12-month period since before the 2008 housing crash when it was 14%.
By the end of February 2023, Zillow forecasts that the average U.S. home will be worth nearly $400,000. This continued rise in values, Zillow says, “is driven by our expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes.”
Home Prices Climb Six Times Faster Than Wages
Putting the challenge for home buyers into perspective: Home prices are rising six times faster than wages, Fortune reports.
“We are right in the heart of spring homebuying season, and it’s wild and it’s crazy out there. It is causing some frustration at this point in the real estate market,” Devyn Bachman, vice president of research at John Burns Real Estate Consulting, told Fortune. “It’s going to be tough (for buyers) through at least the spring.”
Zillow points out that the Federal Reserve’s efforts to bring inflation under control could affect its forecast.
“However, downside risks to our forecast remain. Continued elevated inflation heightens the risk of further monetary policy tightening, which would result in higher mortgage interest rates and weigh on housing demand.”
Interest Rates Still Low, but Climbing
While mortgage rates were down to 2.65% in early 2021, they’re now at 4.16% for a fixed 30-year loan. That might not sound like much of a hike but on a $400,000 mortgage that’s an increase from $1,612 a month to $1,947 a month.
Analyzes Fortune: “While Fannie Mae forecasts home prices will still shoot up 11.2% in 2022, it predicts just a 4.2% bounce in 2023. The reason? Industry insiders hope that the combination of sky-high home prices and rising mortgage rates will help to rein in the market.”
Read more from Fortune at this link.