Zillow July 2021-July 2022 Home Value and Sales Forecast

• Zillow expects home values to grow 12.1% between July 2021 and July 2022, and to end 2021 up 20.3% from December 2020.
• Existing home sales are expected to total 5.89 million in 2021, up 4.3% from 2020.

U.S. home value growth is expected to continue to accelerate through the end of 2021, before beginning to slow through summer 2022. The number of completed home sales nationwide this year is still expected to surpass 2020 levels, though slowed household formation may put a cap on potential sales growth.

Zillow economists expect home values to increase 5.2% over the next three months (July-October), by 8.1% through the end of this year (July-December) and by 12.1% through the twelve months ending in July 2022. The value of the typical U.S. home is expected to end 2021 up 20.3% from the end of 2020. The latest quarterly home value forecast is a downward revision from last month, when we expected 6.3% growth from June-September. The 12-month forecast has also been revised slightly downward from expectations of 13.3% growth between June 2021 and June 2022. The small downward revisions were influenced, in part, by the continued spread of COVID-19 and uncertainty posed by the impact of expiring forbearance programs. Zillow research shows the forbearance program has likely helped avoid a wave of costly foreclosures, and more inventory is expected to hit the market over the next few months as many borrowers exit forbearance and look to sell and capitalize on recent gains in equity.

Our expectations for existing home sales have also softened slightly compared to last month. Zillow expects a total of 5.89 million existing home sales in 2021, up 4.3% from 2020 (on its own the strongest year for existing home sales since 2006) but down from the 5.91 million total 2021 sales expected in our prior forecast. Recent declines in pending home sales volume outweighed what was otherwise a surprisingly strong June existing home sales report, and a continued slowdown in household formation also dented our longer-term outlook for sales.

Continued high inflation also factors into the home value appreciation outlook, presenting both upside and downside risks. On the upside, nominal home prices are likely to stay high with elevated inflation; on the downside, high inflation will put upward pressure on interest rates which can potentially dampen home purchase demand and home value appreciation.