Just when U.S. home values seem impossibly unaffordable, Zillow revised its forecast to reflect even higher prices to come. The company predicted that its national Zillow Home Value Index (ZHVI) will jump 6.5% from July 2023 through July 2024.
Home values surge in a tight market
Zillow credits several factors for driving home price growth over the next year. First, rising mortgage rates increase monthly payments for would-be homeowners in a market that has adapted to low mortgage rates. The average 30-year fixed rate mortgage reached 7.23% last week, the highest rate since the year 2000, according to data from Freddie Mac. The Federal Reserve Board meets again on September 20, and mortgage rates could hold steady or decline slightly if the Fed decides against another rate hike. Fed Chairman Jerome Powell, however, has indicated that he is prepared to raise rates if needed. The central bank raised the fed funds rate, a key overnight bank lending rate, by a quarter-percentage point, to a range of 5.25% to 5.50% as of the last Fed meeting in July.
It’s no secret that tight inventory is also driving up home values. Zillow forecasts that 2023 home sales will hit 4.2 million, representing a 17% decline from 2022. And when compared to pre-pandemic inventory, the picture looks even more discouraging for home buyers. This lack of available housing translates into faster sales; homes for sale in July 2023 went under contract in only 12 days, compared to about 22 days in 2019.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Forecasts can be wrong, of course. In fact, Kiplinger’s economic forecasting team is more bearish than Zillow, predicting that high mortgage rates will drive housing price declines over the next few months.
Read More
-
Use the 'Newton Rule' to Grow Your 401(k) Retirement SavingsHarnessing Sir Isaac Newton's rule of retirement can boost your 401(k) savings while you chill.
-
Are You a Small Business Owner Buckling Under Economic Pressure? Here's How You Can CopeSignificant emotional and financial challenges, including tariff worries, are piling up on small business leaders. Here's how leaders can develop more healthy coping strategies and systems of support.
-
How Location Changes the Math on Owning a Vacation HomeThe market you choose can make your dream getaway a smart investment — or an expensive mistake.
-
Home Equity in Retirement: Should You Sell, Borrow or Rent?Learn how to preserve your property's value, tap equity for income and make smart choices about downsizing, renting or leaving a legacy.
-
Falling Interest Rates: What They Mean for Homeowners, Savers and InvestorsAs interest rates fall, homeowners may celebrate while savers feel the pinch. Here’s what the change could mean for your money.
-
Refinance Applications Surge as Mortgage Rates TumbleThe window to refinance is reopening as mortgage rates hit their lowest level in nearly a year. Here’s what the market shift means for homeowners.
-
Cash vs. Mortgage: How to Pay for Your Second HomeShould you buy your second home outright or finance it with a loan? Weigh the pros, cons and tax implications before making the leap.
-
Mortgage Rates Dip to Year-Low as Jobs Data DisappointsWith August job growth falling short of expectations, markets drive 30-year mortgage interest rates down, opening refinance and homebuying opportunities.
-
Can You Afford a Million-Dollar Home on a $250,000 Salary?It’s more than the sticker price — mortgage rates, down payments, taxes and debt all factor into whether a million-dollar home fits your budget.
-
Why a Landmark Real Estate Commission Settlement Hasn’t Lowered Costs for HomebuyersThe 2024 NAR settlement promised commission transparency and negotiation —but one year later, average fees remain unchanged. See why change has been slow and what it means for homebuyers and sellers.
