• Zillow’s home value forecast remained generally unchanged in October, as the housing market continued to slow amid rising mortgage rates and broader economic uncertainty.
• Zillow projects home values remain flat through the end of the year, and increase by 1.3% in the twelve months ending September 2023.
• The team’s near-term outlook for existing home sales was revised up slightly following surprisingly strong August existing homes data, but recent data point to downside risks to sales volume.

Zillow expects home value growth to continue to slow over the coming months. The national Zillow Home Value Index, which increased by 12.9% in the twelve months ending in September, is expected to grow by just 1.3% in the next twelve months, according to Zillow’s monthly home value forecast. This long-term outlook is in line with last month’s projections, which called for a 1.2% annual increase.

Zillow’s home sales forecast now calls for 5.2 million existing home sales in calendar year 2022, up slightly from last month’s expectations for 5.1 million sales following a better-than-expected reading on home sales in August. The outlook from there is cloudier, however, and recent declines in mortgage applications and pending home sales activity suggest that there are significant downside risks to home sales volume into 2023. 

These forecast updates come at a time in which the housing market undergoes a rebalancing while facing persistent headwinds. Increasing and volatile mortgage rates continue to present challenges for both potential home buyers and sellers. Affordability obstacles are as high as they’ve been in recent memory, capping demand and placing downward pressures on prices. The flow of new listings remains much lower than a year ago, providing some support for prices but capping the potential for sales activity. Combined, there remain significant downside risks for the housing market as the end of the year approaches.