Sky-high mortgage costs are driving away some prospective homeowners, and a market firmly in favor of buyers is expected before the end of next year, according to a majority of economists and housing experts surveyed by Zillow.
The panel also expects rent growth to outpace inflation during the next 12 months, as priced-out potential home buyers exert additional pressure on the rental market.
Home-value growth, which hit record highs over the course of the pandemic, is now slowing, as affordability challenges magnified by quickly rising mortgage rates are pushing many buyers to the sidelines.
Values are ticking down slightly across the U.S. and declining more steeply in some of the most expensive metros, as well as those metros that grew the fastest over the past two years.
“After the frantic rush for real estate over the past two years, buyers are finally seeing a calmer market. Those still able to afford homeownership are quickly regaining lost leverage, but this shift to a more balanced market is still in its early stages,” said Nicole Bachaud, senior economist at Zillow. “Home shoppers priced out of the market are in a tight spot, though, as high and rising rents could cut further into their ability to save up for a down payment.”
Zillow’s expert panel expects the U.S. housing market to shift in favor of buyers by the end of 2023. Markets projected to cool the fastest are those that saw some of the largest growth over the course of the pandemic, including Boise, Austin and Raleigh.
Inexpensive Midwest markets – such as Columbus, Indianapolis and Minneapolis – are the least likely to see home prices decline over the next 12 months, according to survey respondents.
Fast-growing markets in the South, like Atlanta, Nashville and Charlotte, are also expected to retain their mojo with less chance of declines over the coming year.
Suburban and exurban areas are predicted by the panel to retain their heat over the next 12 months, while vacation areas were considered the most vulnerable to price declines, the panelists noted.