Back in 1981, the New York Times ran a piece titled “The Coming [Housing] Collapse Is Already Here.” The premise of the article was that the Federal Reserve’s inflation fight—which pushed mortgage rates to a peak of 18%—was about to pop the nation’s housing bubble. In the end, while home sales and homebuilding levels did plummet, the predicted ’80s housing crash didn’t manifest.
Fast-forward to 2022, where the Fed’s ongoing inflation fight once again has folks questioning if a housing crash is just around the corner. Just as in 1981, we are seeing spiking mortgage rates push the U.S. housing market into a sharp slowdown. On a year-over-year basis, existing home sales and new home sales are down 20.2% and 29.6%, respectively.
That sharp contraction in the U.S. housing market—something both the National Association of Home Builders and National Association of Realtors call a “housing recession”—does have analysts downgrading their 2023 home price forecasts. However, we’ve yet to see a research firm predict a nationwide housing crash—something industry insiders say would require a peak-to-trough decline greater than 20%.
This week Zillow revised its 12-month outlook and now predicts that U.S. home values will climb 1.4%. That’s down from the 2.4% it forecasted a month earlier, and down from the 7.8% it forecasted back in July.
And while Zillow expects national home price growth to decelerate to 1.4%, it will vary significantly by market. Let’s take a deeper look.
Back in July, Zillow economists predicted that just five regional housing markets were poised to notch falling home values over the coming year. Then in August, Zillow economists revised that count to 123 regional markets.
This week, Zillow economists updated that forecast. They now predict that 259 of the nation’s 896 regional housing markets are likely to see declining home values between August 2022 and August 2023. Of those, four markets are predicted to see home value declines of greater than –5%. That list includes Fairbanks (–7% forecasted decline); Lake Charles, La. (–6.1%); Minot, N.D. (–6%); and Mount Gay, W.Va. (–5.1% decline).
However, Zillow still predicts that the vast majority of regional housing markets will see rising home values in 2023. In total, Zillow forecasts that 615 markets are poised to see higher home prices over the coming year. Another 22 markets are predicted to remain flat.
While Zillow predicts that home values in most markets will tick up over the coming 12 months, it doesn’t think much growth will come in the remaining months of 2022. In fact, over the next three months (see map above), Zillow predicts that home values will fall in 552 markets. Why? This summer, around two-thirds of the nation’s largest housing markets saw home values slip in the face of spiking mortgage rates. As we speak, the economic shock from higher mortgage rates continues to chip away at some of the gains made this spring.
“Our view is that you will see—and we’re seeing it right now—home prices will fall even though supply levels are not ripping higher. And I think that’s an interesting thing that is now starting to surprise a lot of people,” Rick Palacios Jr., head of research at John Burns Real Estate Consulting, tells Fortune.
Let’s be clear: There’s no consensus when it comes to 2023 housing forecasts. Firms like CoreLogic, Fannie Mae, Freddie Mac, and Zillow are all still forecasting positive home price growth over the coming year. Meanwhile, firms like John Burns Real Estate Consulting, Zonda, Capital Economics, Moody’s Analytics, and Zelman & Associates all predict falling home prices over the coming year.
This story was originally featured on Fortune.com