Zillow expects home value growth to slow considerably over the next year, from the current rate of 14.1% annual growth to 1.4% growth over the coming year. This is a downward revision from August’s year-ahead forecast of 2.4% home value growth.
Zillow’s home sales forecast now calls for 5.1 million existing home sales in 2022. That is a downward revision from an expectation for 5.3 million existing home sales a month earlier, and would mark a 16.4% decrease from 2021, which was the strongest calendar year for home sales since 2006.
The downward revisions come as a result of recent housing market indicators continuing to show buyers hanging back while affordability obstacles remain as high as they’ve been in recent memory. The Zillow Home Value Index showed home values declined from July to August, the second straight monthly dip. Days to pending and total inventory are climbing, while the flow of new listings is much lower than a year ago, indicating homes are lingering on the market longer without a sale.
Mortgage rates rose in August and inflation pressures remained strong, which may lead the Federal Reserve to raise interest rates faster than expected. Mortgage rates have already risen in the first half of September and exceeded 6% for the first time since 2008 on September 15. Affordability challenges brought on by higher mortgage rates this year are a key driver of cooling home buyer demand.