Moody's Analytics chief economist Mark Zandi walks back his bearish home forecast: 'prices will go more or less sideways for a while'

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Back in April 2022, Moody’s Analytics chief economist Mark Zandi told me that spiked mortgage rates would push the U.S. housing market into a “housing correction.” On that phone call, he predicted that existing homes would fall sharply, year-over-year national home price growth would decelerate to 0% by May 2023, while "significantly overvalued” pandemic boomtowns like Austin and Boise would experience declines between -5% and -10%.

As mortgage rates began to spike in the summer of 2022, and as many markets slipped into home price corrections, Zandi became more bearish, with his model predicting just over an -8% peak-to-trough decline and indicating that some "significantly overvalued” markets like Austin and Boise would experience around a -20% fall.

Nationally speaking, those house price declines didn't quite manifest, with most indices showing that U.S. home prices fell around -3% to -5% from June 2022 to December 2022, and subsequently quickly regained those losses and jumped to a new all-time high in the summer of 2023. Zandi was correct about some “significantly overvalued” markets, like Austin and Boise, taking a double-digit hit; however, other frothy places, such as Charlotte and Atlanta, have proven more resilient than he anticipated.

As national house price growth stabilized in 2023, Moody’s model predicted it was more of a head fake than a recovery. Back in October, Zandi’s model estimated that U.S. home prices, as measured by Moody’s repeat sales index, would fall -4.4% between Q4 2023 and Q4 2024.

Last week, Zandi told ResiClub that his model is no longer so bearish on U.S. home prices.

The latest forecast model produced by Moody’s Analytics expects U.S. home prices to fall -0.4%. In other words, a flat year.

LEFT: Zandi’s 2024 house price forecast produced in October

RIGHT: Zandi’s revised 2024 house price forecast produced this month

“I expect national house prices to be flat to modestly down over the next 2-3 years. This, along with rising household incomes and lower mortgage rates should eventually repair housing affordability and revive existing home sales. I had expected more meaningful [home] price declines and a quicker restoration of [housing] affordability and sales, but the lock-in effect has been extraordinarily persistent, limiting the available supply of homes and thus supporting prices. But as time passes and life events occur, including death, divorce, children and job changes, I expect homeowners will need to move, and inventories of homes for sale will increase. Prices will go more or less sideways for a while,” Zandi tells ResiClub.

Zandi expects the U.S. economy to avoid recession in 2024, and for the 30-year fixed mortgage rate to average 6.0% this year and 5.5% in 2025.

Click here to see an interactive version of the latest home price forecast produced by Moody’s Analytics

While Zandi pretty much expects national house prices to be flat in 2024, he thinks some pockets of the Northeast, including Rochester, N.Y. (+7.1% forecast) and Albany, N.Y. (+7.9% forecast), could see elevated price growth. Additionally, his model suggests that certain pandemic boomtowns like Austin (-6.0% forecast), Boise, Idaho (-5.4% forecast), and Provo, Utah (-5.9% forecast) could see house price declines this year.

How does that outlook compare to other forecast models?

Among the 15 forecast models tracked by ResiClub, the average model expects U.S. home prices will rise +2.2% in 2024. Click here for the full round up.