BAM Key Details:
- Housing economists surveyed by Zillow predict home prices will bottom out in 2023, falling by 1.6%, and then grow by an average 3.5% from 2024 to 2027.
- Experts also forecast a slide in home sales to 4.2 million for 2023, down from 5 million in 2022.
- 63% of the panel expect the 30-year fixed mortgage rate to hit its highest point for this year in Q1, with the median respondent expecting a 6.0% rate at year’s end.
The results of the Zillow Home Price Expectations (ZHPE) survey are in, with economists and housing market experts weighing in with their forecasts on home prices, home sales, and mortgage rates for 2023 and beyond.
The consensus has home prices bottoming out in 2023, falling by 1.6%, and then growing from 2024 to 2027 at an average rate of 3.5% per year—nearly echoing the pre-bubble period from 1987 to 1999.
Source: Zillow
Here’s what you need to know.
Expert panel forecasts for home prices, home sales & mortgage rates
High mortgage rates have had predictable consequences for property values and home sales across the U.S., though low inventory also plays a role.
According to the Zillow Home Price Expectation (ZHPE) survey, experts on the housing market expect home prices to decline by a total 1.6% this year, followed by a steady uptick in 2024.
That upward trend is expected to continue through 2027 with an average growth rate of 3.5%, which more closely aligns with long-term averages.
Meanwhile, regarding new home sales, the panel expects a decline this year to nearly 2016 levels, with sales of both new and existing homes falling, largely due to high housing costs. Lower mortgage rates in January brought a surge in buyer demand, which cooled with the higher rates in February.
Zillow’s panel expects typical home values to remain nearly flat in 2023, rising just 0.2% over the course of the year.
The biggest home price declines are expected in pricey California metros.
The housing market is resetting. Though we’re seeing early signs of renewed buyer interest early this year, prices should generally flatten out in 2023, helping buyers to catch up. The sheer number of people in the first-time homebuyer age range and a lack of inventory should limit price declines. A return to more normal growth would be welcome after the rollercoaster ride that home prices have been on lately.
Home sales are expected to drop to 4.2 million in 2023, down from 5.0 million in 2022 but slightly higher than the seasonally adjusted annual sales rates for November and December 2022.
Housing experts also predict new construction, which will also see a decline in sales, will play a larger role to meet the growing need for inventory.
With mortgage rates hovering around 7% for the 30-year fixed, existing homeowners are reluctant to list, and home builders are offering significant buyer incentives to offset affordability constraints.
Nearly two-thirds of the expert panel (63%) expect mortgage rates to reach their peak for the year in Q1 and then trend downward. Only 22% expected rates to peak in Q2.
The median respondent predicted a 6.0% rate for 30-year fixed mortgages by year’s end.
The majority of experts are now predicting an outright decline in U.S. home prices in 2023. Although mortgage rates have moderated and are expected to remain close to the 6% level at year-end, the 2022 rate spike—and the record-high mortgage costs it ushered in—continues to shake home price expectations and market psychology.
Top takeaways for real estate agents
The findings from the Zillow survey provide a mixed outlook for the U.S. housing market. Buyers will welcome the news that economists predict a bottoming out of home prices in 2023. But with a forecasted slide in home sales, inventory will remain an issue for those on the search for a home.
The survey also indicates that mortgage rates are likely to reach their highest point for the year in Q1, with the median respondent expecting a 6.0% rate at year’s end. Looking ahead to 2027, homeowners can expect their equity to grow—though not as quickly as it did from 2020-2022.
These insights can be useful for homebuyers, sellers, and investors as they make decisions in the months and years ahead. As always, it’s important to monitor developments in the market closely, and share those developments with consumers in your market.
