Zillow Group Inc. ZG came out with its index of home values and sales for the month of November, which forecasts a decline in sales and values. Here’s what you need to know if you’re a potential buyer.
What happened: According to Zillow forecasts, home value growth will continue to slow in the coming months.
The Zillow Home Value Index, which rose 11.9% in the year ending October, is expected to rise just 0.8% in the year ahead. Zillow said that compared to last month’s forecast of 1.2% annual growth, the long-term outlook is slightly worse.
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Expectations of further declines in the volume of home sales in the coming months are a major factor in this negative estimate. A lower prediction for home sales results in more inventory and therefore a faster decline in home values, causing the downward adjustment.
Zillow projects 5.1 million existing homes will be sold in calendar year 2022, down 16% from 2021. That’s slightly less than the 5.2 million expected from September.
The drop in sales is expected to be caused by high mortgage rates and significant affordability issues through 2023.
Why is this important: In addition to making monthly payments unaffordable for potential buyers, high interest rates have had a chilling effect on landlords who have kept residents in their current properties. Home prices remained largely unchanged as buyers and sellers retreated from the market.
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Zillow predicts that the value of typical U.S. homes will fall 0.6% from October 2022 to January 2023, before recovering and posting growth of 0.8% by the end of October 2023.
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