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Short Summary
Main recommendation: Treat Zillow's upgraded 2023 home price forecast of 5 percent growth as a sign of a stronger housing market, but expect the host's own view that prices will end 2023 roughly flat, between negative 3 and positive 3 percent. The host argues that low supply and falling demand have kept prices stable, and that mortgage rates will decide whether prices correct or rise. The video also notes that the economy has held up better than expected.
Key Points
- Zillow's forecast moved from a 1.1 percent decline at the start of 2023 to 3.9 percent growth a month earlier, then to 5 percent for the year.
- Other institutions also revised upward: CoreLogic projects 4.3 percent year-over-year growth, Goldman Sachs projects about 1 percent growth, and Morgan Stanley upgraded its forecast.
- Demand has fallen sharply: the Mortgage Bankers Association Mortgage Purchase Index was about 300 in 2021 and is now about 150, roughly halved in 18 months.
- Supply is also very low, with home inventory flat through 2023 and new listings down almost 30 percent year over year, largely due to owners keeping low mortgage rates (the lock-in effect).
- Economic indicators are holding up: Q2 2023 real GDP grew 2.6 percent annualized, unemployment is low, and continuing unemployment claims are falling.
- The host's own October forecast of a 3 to 8 percent decline now looks too bearish; he revises his view to roughly flat, between negative 3 and positive 3 percent.
Details Worth Noting
- Otherwise, the video offers forecasting guidance: track mortgage rates as the key signal, watching whether they stay above 7 percent (pointing to price declines) or fall to the low sixes (pointing to flat or rising prices).
- The host notes Zillow's business model may favor a bullish housing view, but says Zillow was among the more accurate models in 2023 since prices stayed about flat, as it forecast last year.
- Case-Shiller data lags about three months, showing prices down about 1.7 percent through April, while Redfin, Zillow, and others show national prices roughly flat year over year.
- Inventory data from Redfin goes back to 2012 and shows listings extremely low by historical standards, with a late-2022 uptick and flat activity through 2023.
- Consumer spending drives about 70 percent of U.S. GDP, and the host says it continues to rise.
- The host explicitly declines to forecast 2024, warning that unemployment could rise and GDP could turn negative, with any major correction more likely then.
Bottom Line
Housing prices are likely to end 2023 near flat rather than falling, and mortgage rates will determine whether that holds or changes course in 2024.
