Zillow’s expectation for the nation’s typical home value was revised upward again this month. Zillow forecasts the national Zillow Home Value Index (ZHVI) to end 2023 5% above where it began the year. That’s an upward revision from last month’s forecast, which called for 3.9% growth in 2023. Typical home values are predicted to rise 5.8% from May 2023 through May 2024.
Tight inventory conditions were the primary driver of the upward revision. The number of active for-sale listings in May was the lowest for that month in our records’ history, which dates back to 2018. The shortage, and a persistent trickle of new listings entering the market, spurred the fastest month-over-month home value appreciation in nearly a year. Despite the limited options, buyers remain eager to snap up homes at a decent rate. Newly pending sales – a measure of homes that went under contract – in May rose at a stronger rate than the market tends to see this time of year, even as mortgage rates remain elevated, presenting affordability challenges for many.
Zillow’s forecast for existing home sales this year was revised downward, for essentially the same reasons. Zillow now expects 4.2 million home sales to occur in 2023, down slightly from last month’s projection of 4.4 million, which would represent a 17% decline from 2022. Expectations for modest declines in mortgage rates should stoke home buyer demand some, but low inventory and higher prices will likely offset these impacts, limiting the potential for sales.