Though recent reports say there’s a cooldown happening for the housing market, Zillow predicts home prices will not start to slow until summer 2022. Zillow economists believe home values will increase 5.2% by October, reach an increase of 8.2% by December, and hit a 12.1% increase by July 2022 before prices will dip. These are slightly adjusted estimates from previous Zillow forecasts due to the uncertainty of the delta variant spread and potential impact of expiring forbearance programs. Expectations for existing home sales were also adjusted to a total of 5.89 million existing home sales for the year, slightly down from the previous prediction of 5.91 million.
Recent declines in pending home sales volume outweighed what was otherwise a surprisingly strong June existing home sales report, and a continued slowdown in household formation also dented our longer-term outlook for sales.
Continued high inflation also factors into the home value appreciation outlook, presenting both upside and downside risks. On the upside, nominal home prices are likely to stay high with elevated inflation; on the downside, high inflation will put upward pressure on interest rates which can potentially dampen home purchase demand and home value appreciation.