Zillow poll: Home prices will fall this year at an average of 1.6%, then rise at an annual rate of 3.5%

Zillow poll: Home prices will fall this year at an average of 1.6%, then rise at an annual rate of 3.5%

A Zillow survey showed that home prices would fall this year but then enter a period of growth like the one that began in the late 1980s.

A Zillow survey said U.S. home prices would fall 1.6% in 2023, then rise at an average annual rate of 3.5% through 2027.

This is the same pace seen in the relatively stable period from 1987 to 1999.

Under this scenario, home prices would rise 23% in 2027 from 2021 levels, according to Zillow.

While U.S. home prices are expected to decline this year, the housing market will rebound and enter a steady growth cycle, according to economists polled by Zillow.

The Zillow Home Price Expectation survey showed that in 2023, house prices will decline by 1.6% and then rise at a clip-on rate of 3.5% annually from 2024 through 2027.

This is the same pace seen in the relatively stable period from 1987 to 1999, Zillow said, "before the housing boom and bust cycle of the 2000s." Under this scenario, house prices would rise by 23% in 2027 from 2021 levels.

"A return to more normal growth would be welcome after a roller coaster ride in home prices recently," Jeff Tucker, chief economist at Zillow, said in a press release.

But for now, high mortgage rates continue to keep buyers away. The 30-year fixed mortgage has been falling to nearly 7% as the market rates are under prospects of further tightening from the Federal Reserve to tackle vicious inflation.

According to the Case-Shiller Index, home prices have fallen for six months and are down 4.4% from their summer peak.

But Zillow said the huge number of people in the first-time homebuyer age group and the limited housing stock should limit the price decline.

Mortgage rates will drop after the first quarter, as most economists in the Zillow survey predicted, and estimated the rate to remain at 6% through the end of the year.

Thursday's Zillow results provide a more moderate view of a housing market that some analysts are wary of crashing. In late February, central bank economists indicated that the market was poised for a 19.5% correction, while a Goldman Sachs note predicted a 6.1% drop in house prices this year.