• Zillow’s forecast for existing home sales in 2022 was revised down slightly as leading indicators point to continued slowing in the housing market in the near term. 
• Weaker sales data led to a downward revision in Zillow’s price growth forecast for 2023.
• Zillow projects typical U.S. home values to fall 1.1% from November 2022 to November 2023. 

Zillow forecasts that home value appreciation will continue to ease down over the coming months. The national Zillow Home Value Index, which rose 10.4% in the 12 months ending in November, is expected to fall 1.1% over the next 12 months. This long-term outlook is substantially lower than last month’s call for a 0.8% annual increase. This downward adjustment is due in large part to expectations for more declines in home sales activity in the coming months. A weaker home sales forecast translates to more inventory, and therefore a faster correction in home values, leading to the downward revision. For the 12 months from December 2022 to December 2023, Zillow projects only a 0.7% decline in the Zillow Home Value Index.

Zillow expects 5.0 million existing homes to be sold in calendar year 2022 – a 17.5% decrease compared to 2021. This is down slightly from November’s forecast for 5.1 million sales. High mortgage rates and major affordability challenges are predicted to drive even weaker sales in 2023, when they are projected to total 4.4 million, a 13% decrease from the projected full-year 2022 total.

Mortgage rates cresting above 7% combined with normal seasonal trends to put the housing market in a deep freeze this November, sending prices down slightly (0.2%) while further depressing sales volumes. But substantial declines in mortgage rates – now down to 6.31% – and promising data showing a decline in inflation, all give grounds for cautious optimism that the worst is behind us when it comes to borrowing costs, and some of the deterred homebuying demand from this fall may return in the new year. That possibility, coupled with still-low inventory by historical standards, provides the basis for Zillow’s forecast continuing to rule out the possibility of double-digit price declines in 2023 for the nation as a whole.