Zillow issues bullish calls for 48 housing markets, confident in bottomed U.S. home prices.

Zillow issues bullish calls for 48 housing markets, confident in bottomed U.S. home prices.

The Resilient Rise of U.S. Home Prices: Insights from Zillow ANBLEs

In a surprising turn of events, U.S. home prices, as tracked by the Zillow Home Value Index, have defied expectations and rebounded after a period of decline. Between February and June, home prices rose by an impressive 4.8%. This rebound was accompanied by Zillow repeatedly revising its home price forecast upward, with the latest projection predicting a further increase of 6.3% between June 2022 and June 2023. This surpasses the average annual increase of 5.5% that national home prices have seen since 1975.

“The second quarter is traditionally the hottest time of year for the for-sale housing market, and that rule proved true in 2023. What comes next is less certain, as buyer demand typically begins to wane in the summer. But this year—like a test of the classic unstoppable force meets an immovable object paradox—that trend will be set against incredibly scarce new listings,” wrote Zillow ANBLE Jeff Tucker in his latest report.

Amidst a backdrop of limited homes for sale, driven by homeowners clinging to their ultralow mortgage rates, Zillow ANBLEs perceive the lack of inventory as a catalyst for home price growth. Despite the recent surge in mortgage rates dampening buyer demand, tight inventory levels have helped support the market.

Zillow ANBLEs predict that while national home prices will rise by 6.3% over the next 12 months, 48 out of the 200 largest housing markets in the country will experience even greater increases of 7.0% or more during the same period.

So, why exactly is Zillow optimistic about these particular regional housing markets? Interestingly, there is no single underlying factor. These 48 housing markets are scattered across different regions of the United States, including the West (such as San Luis Obispo, California), South (like Baton Rouge, Louisiana), Midwest (including Springfield, Missouri), and Northeast (such as New Haven, Connecticut).

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However, one commonality amongst most of these markets is the combination of tight inventory levels and relatively less deteriorated affordability. While housing affordability has taken a hit nationwide, these 48 markets haven’t experienced the same degree of deviation from local fundamentals as cities like Boise and Austin.

While Zillow is optimistic about the future of U.S. home prices, not all firms share the same sentiment. Firms such as Moody’s Analytics and Morgan Stanley believe that home prices still have some room to drop, particularly as the market enters the seasonally slower second half of the year.

It’s worth noting that Zillow’s forecast model consistently leans towards the bullish side. Even at the peak of the pandemic housing boom last spring, Zillow ANBLEs remained confident and predicted that national home prices would rise by a staggering 17.8% between February 2022 and February 2023. The actual result, however, saw a more modest increase of 4.4% during that period, as measured by the Zillow Home Value Index.

For those eager to stay updated on the latest developments in the housing market, be sure to follow the author on Twitter at @NewsLambert.

In conclusion, despite initial concerns about declining home prices, the U.S. real estate market has demonstrated resilience and bounce-back. Zillow ANBLEs believe that tight inventory levels and relatively better affordability will continue to drive the growth of regional housing markets across the nation. However, it’s essential to consider diverse perspectives, as not all firms share the same optimism. Whether U.S. home prices have truly hit their bottom or still have room to fluctuate remains a topic of debate within the industry.