If you’re in the market to buy a new home, there’s some good news and some … okay, there’s not a lot of good news. The bad news is this: A continued tight supply of available homes in the United States is likely to push prices up by double-digits over the next year following an even bigger gain in 2021.
U.S. home values are forecast to rise 13.6% between October 2021 and October 2022, according to the latest estimates from Zillow Research. That’s on top of an expected 19.5% gain for all of 2021. Zillow sees existing home sales reaching 6.12 million units in 2021, up 8.5% from last year.
“The strong long-term outlook is driven by our expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes,” Zillow said on its website.
The typical home value in the U.S. was $312,728 as of Oct. 31, Zillow noted. An average increase of 13.6% would move that figure up to around $355,000.
Near term, home values are expected to climb 3.8% in the three-month period from October to January 2022. That’s slightly lower than the 4.4% growth previously forecast for September to December, amid a recent slowdown in home value growth during the summer and early fall.
Even with the higher prices, some Americans still have incentive to purchase homes because of historically low interest rates.
“Though sharply rising home prices present affordability challenges for many, low mortgage rates continue to keep monthly payments manageable for those who can afford a down payment,” Zillow said.
That might not last much longer, however. In terms of downside risks moving forward, Zillow cited the expiration of mortgage forbearance programs along with rising inflation, the latter of which “heightens the risk of near-term monetary policy tightening” and might result in higher mortgage rates.
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