Zillow walks back its bullish 2024 home price forecast

In August, I tweeted that "Zillow is a full-blown housing [price] bull" after its housing economists released a forecast predicting a +6.5% increase in U.S. home prices between July 2023 and July 2024, even though mortgage rates had just crossed 7.5%.

After I tweeted that out, Zillow’s chief economist Skylar Olsen responded saying they’re a “bull for [home] prices, a bear on quantities [resale transactions]… enough demand (demographics; strong labor) plus supply pull back (rate lock in; construction financing) equals prices up.”

Fast forward three months, and Zillow is walking back that bullish home price forecast.

On Monday, Zillow downgraded its home price forecast, predicting that home prices would fall -0.1% between October 2023 and October 2024. The map below shows its regional home price forecast for the nation’s 400 largest markets.

This marks the third straight month that Zillow has revised its home price forecast down. Back in September, Zillow moved its 12-month U.S. home price forecast from +6.5% to +4.9%. Then in October, Zillow moved its 12-month U.S. home price forecast from +4.9% to +2.2%. While yesterday, Zillow cut its 12-month outlook from +2.2% to -0.1%.

The image below shows Zillow’s 12-month regional home price outlook released in August [on the left] next to its 12-month outlook released on Monday [on the right].

Here’s how Zillow explained its downgraded forecast last month: “Zillow’s forecast of the nation’s typical home value was revised downward this month due to an uncharacteristic month-over-month dip in September and mortgage rates climbing ever higher.”

While Zillow has yet to comment on its downward revision this month, it’s safe to assume that it’s the same two factors at play: 1. Mortgage rates remain over 7%. 2. On Monday, we learned that U.S. home prices as tracked by the Zillow Home Value Index fell -0.3% in October after falling -0.1% in September.

Big question: Where are mortgage rates come December as the U.S. housing market begins to shift from the seasonally weak season into the seasonally stronger spring window? As of today, the average 30-year fixed mortgage rate sits at 7.40%.

Final point: We just experienced an unprecedented period marked by a pandemic, lockdowns, historic stimulus, ultra-low interest rates, an inflationary shock, and a historic interest rate shock. Forecasting during and after all of that has been challenging. Back in August, Zillow’s chief economist Skylar Olsen concurred, telling me that "ANY [home price] forecast right now comes with high margins of error."

The interactive map below shows Zillow’s latest home price forecasts for the nation’s 400 largest metro-area housing markets.