Home value growth, which hit record highs over the course of the pandemic, is now slowing as affordability challenges — magnified by quickly rising mortgage rates — are pushing many prospective buyers to the sidelines. Typical home values are ticking down slightly across the U.S. and declining more steeply in some of the most expensive metros, as well as those that grew the fastest over the past two years.
Although home price growth has slowed, the market is far from pre-pandemic norms. Zillow’s latest market report showed listings’ typical time on market, while rising, is still 11 days shorter than in 2019. Inventory is ticking up as well, but is still down almost 42% compared to 2019. The majority of the panel (56%) expects a significant shift in buyers’ favor by sometime next year. Another 24% predicted that shift would come in 2024, 13% pointed to 2025, and just 8% expect it after 2025.
Although the panel-wide 2022 expected home price appreciation rate ticked up to 9.8% from 9.3% in this most recent survey, all 107 survey respondents project home price deceleration in 2023. The share of panelists who believe their long-term outlook might be too optimistic jumped up to 67% from 56% last quarter.
Markets projected to cool the fastest — with 77% of respondents expecting declines — are those that saw some of the largest growth over the course of the pandemic, including Boise, Austin and Raleigh.
Suburban and exurban areas are predicted by the panel to retain their heat over the next 12 months, while vacation areas and urban areas were considered the most likely to see price declines.
