US home prices are set to surge as high mortgage rates keep inventory tight, Zillow says. The real estate listings site predicted a 6.5% increase in home prices by July 2024. Other firms are predicting a slight decline in home prices by the end of the year. Loading Something is loading.
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Home prices are set to surge over 6% in the next year, according to Zillow economists, attesting to the real estate listings site’s growing bullishness on the US housing market.
The firm’s economists predicted home prices would rise 5.8% by the end of 2023, and rise 6.5% by July 2024, according to its Home Value Index. That implies the median US home price will rise to $370,754 by July of next year, up from the current median price $348,125.
That forecast runs contrary to what other firms have predicted by year-end. Realtor.com is expecting a 0.6% decline in home prices by the end of 2023, and Redfin is expecting a 4% decline.
Zillow said its prediction is largely due to the shortage in housing inventory, which has propped up home prices over the last year. The available supply of homes on the market has been slashed in half since July 2019, the firm’s research team estimated.
“Limited for-sale inventory continues to push home prices upward even as mortgage rates remain elevated,” Zillow researchers said in a recent note. “The tight inventory conditions and the persistence of elevated mortgage rates are also expected to continue to limit sales volume in the months to come.”
Housing affordability has been strained over the past year thanks to high mortgage rates, which have stuck close to a 20-year record. Though high rates typically weigh on demand, they have also discouraged existing homeowners from listing their properties for sale, as many are looking to cling to the low rates at which they financed their home years ago.
The result is an imbalanced housing market, with affordability unlikely to improve until mortgage rates dial back more significantly, experts say. Rates would need to fall to the 5% range to unlock more inventory, according to industry veterans.
With no relief in sight for the current affordability crisis, Zillow is now offering prospective homebuyers the option to pay just a 1% down payment on a newly purchased home.