Now that Zillow is finally ready to come clean about the housing market, we NEED to talk about it!
Zillow's latest housing forecast is a major downgrade from their previous predictions. Last month, Zillow forecasted a 6.9% home value growth over the next 12 months. However, their latest outlook for home prices has been revised down to 2.4%. Okay so what gives?
Well this is actually their fifth downward revision since March. Up until now Zillow has really been the bull in the market, so to speak, but not so much now. Zillow's forecasts have finally come in line with other industry insiders who have been predicting a slower rate of growth for the housing market.
Wondering what's actually happening across the board and today in the housing market? Let's take a look!
(Click to take a look at more market updates here!)
Well first of all, in order to provide more accurate predictions Zillow has revised their home value and sales forecast process. They’ve been bullish, bullish, bullish and suddenly they’re like maybe we need to rethink how we’ve been handling this data. They say the revision is due to the “quickly changing observed market conditions” and an update to the forecast methodology. Zillow's home value forecast is a combination of several factors, and one that they’ve just added in is the share of for sale listings that receive a price cut.
According to Zillow this share has seen a sharp increase in recent months as home sellers adjust their strategies amid changing market conditions. Well, for some reason Zillow believes this is relevant information for their forecast - hmm - and now they’re including it in the calculation.
Zillow goes on to say in this article that a weaker outlook for home sales is also a factor in the company's lower forecast for home value appreciation. Zillow is now forecasting 5.3 million existing home sales in 2022, a 14.1 percent decrease from 2021. Zillow cites several reasons for the weaker outlook, including higher mortgage rates, uncertainty about the economy and inflation.
Here’s where they’ve made a pretty big change though.
It has to do with how they calculate their statistics. Zillow used to average out three months worth of sales for their calculations. Then they would take that number and change it based on what usually happens that time of year. In other words, they kind of played with the numbers in a not so scientific way. Well now they have stopped doing this because the market is changing so quickly. The market is experiencing "unparalleled volatility" and Zillow is now using just the straight numbers month to month. This raw data tells a different story than the averages did.
Honestly Zillow has long been known to play around with numbers and forecasts, much to the frustration of we Realtors who have to deal with the aftermath. Zestimates, in particular, are notoriously inaccurate and can often lead to misunderstandings between sellers and buyers. Zillow cannot see inside your house, so they don't know if it’s been completely renovated or if everything's original. This lack of knowledge often leads to Zillow overestimating or underestimating the value of a home.
And what does that cause? Well a lot of unnecessary frustration for buyers, sellers, Realtors - pretty much all parties involved. Zillow's market forecasts have been a lot more bullish than everyone else’s this year, but they've kinda done an about face and changed their forecast model. It will be interesting to see if this new model will be any more accurate than the last one.
So what's happening in the housing market right now?
According to Zillow, 30 of the nation's 50 largest housing markets saw month-over-month price declines in July. That includes a 4.5% home price dip in San Jose and a 2.8% decline in Phoenix. San Francisco and Austin both saw 2.8% declines, while Sacramento came in at 2.5%. Dallas was a bit further down the list with a 1.1% drop.
So what’s going on in Dallas?
There are a few factors at play here. First of all, we typically see a slowdown in the housing market when school starts back up. Mortgage rates have been on the rise, which can put a damper on things. And finally, some sellers are still trying to hold out for peak prices even though the market has shifted. All of these can lead to longer selling times and ultimately lower prices. In Dallas, price reductions are definitely disproportionate, with the luxury market taking the lion's share of the hit. The lower price ranges are still pretty robust!
What do Fannie Mae and Freddie Mac think about all this?
In spite of all the talk and concern over the future of the housing market, you might find this interesting - Fannie Mae, Freddie Mac, the Mortgage Bankers Association and Core logic are all predicting a low single digit home price increase over the coming year. While the increase is minimal, it is still an increase, right? So these organizations still see home prices appreciating even if it is just a little.
Now, we all get Real estate is very localized, so what is happening in one market may not be the same as what is happening in another market. In other words, what's happening here in Dallas is not going to be the same as San Francisco or Phoenix. I’m really interested in what's happening in your market! Be sure and comment below!
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