- If the forecast comes to fruition, it would be the first time home prices fell on a national level, on an annual basis (apart from a blip two years ago), since the Great Financial Crisis when home values fell year over year every month from July 2007 to June 2012. But “it is a very different environment,” a Zillow senior economist explained—and while it may help buyers some, it won’t put sellers underwater.
Home prices rarely fall. But that may change.
Zillow predicts home prices will fall 1.9% this year. It previously anticipated a 0.6% increase. That was until April. “The combination of rising available listings and elevated mortgage rates is signaling potential price drops by year’s end,” Zillow researchers wrote. “With increased supply, buyers are gaining more options and time to decide, while sellers are cutting prices at record levels to attract bids.”
What that means is after years of a housing market in which not a lot of people were buying or selling, more sellers are coming back than buyers. It’s tipping the scales in the favor of buyers, where home prices dip and available homes for sale linger longer. The backdrop of economic uncertainty stoked by the president’s tariff agenda, which previously fueled a selloff in the stock and bond markets, is only compounding things. Buyers might pull back more, further forcing sellers’ hands.
Would-be buyers and sellers retreated in the last couple of years after home prices soared throughout the pandemic, and mortgage rates skyrocketed not long after. Some couldn’t afford to buy while others refused to sell because they didn’t want to lose a much lower mortgage rate. Home sales are depressed because of that push and pull, although it appears buyers are still holding out and sellers are sick of waiting.
If Zillow’s forecast comes to fruition, it would be the first time home prices fell on a national level, on an annual basis, since the Great Financial Crisis. There was a blip two years ago in June 2023, but it was only a 0.2% slip and was only negative for that month. Before that, the last time home values were negative year over year was June 2012, and they fell year over year every month from July 2007 to then; that five years of decline totaled 23.1%.
At the moment, “it is a very different environment,” Zillow senior economist Kara Ng told Fortune. She later said, “It’s not a bearish forecast.” This time around, it won’t be that homeowners are forced to sell, the way they were during and after the financial crisis, but because buyers are skittish and aren’t returning to the housing market in the same numbers that sellers are after being sidelined, she said.
Plus, since home prices soared so much throughout the pandemic—44.5% since March 2020—it would be a correction, not a crash. Ng called it “really unsustainable” and claimed “some degree of correction was expected.”
A less than 2% drop isn’t much, but any relief when it comes to prices is welcome for anyone who wants to buy, especially because we’re living in a world where a starter home costs $1 million in half of all states, and no one really knows where mortgage rates are going. Still, it’s not a bad situation for sellers, Ng said. They’ve benefited from years of appreciation, and that’s only a dip. If there were more declines ahead, it may be a different story. But Ng couldn’t say what will occur once the year ends. “All we can say is that the homeowner is in a place where I don’t think they will be ever forced to sell, so that puts a floor on how much prices could fall,” she said.
