The first half of 2022 saw national home prices jump 10.7% in just six months. The latter half of 2022 then saw national home prices fall 4.5%. That speaks to the 180 degree shift the U.S. housing market went through last year as the Federal Reserve's inflation fight set off the first housing correction in over a decade.
However, through the first few months of 2023 that housing correction has lost a great deal of steam as markets across the South, Northeast, and Midwest once again begin to post month-over-month home price increases. As the housing market entered the new year it got a boost from its seasonally strong spring period, and from the slight affordability improvement from mortgage rates falling back under 6.5% and national home prices falling some late last year.
That raises the question: Is this the home price bottom or simply a head fake?
It depends on who you ask.
Heading forward, Zillow economists expect U.S. home values as tracked by the Zillow Home Value Index (ZHVI) to rise 0.5% between January 2023 and January 2024. Meanwhile, economists at Moody's Analytics expect U.S. home prices, as measured by the Moody's Analytics Repeat Sales House Price Index, to fall 4.2% between December 2022 and December 2023.
Let's take a closer look at the regional forecast models produced by Zillow and Moody's.
View this interactive chart on Fortune.com
Among the 400 largest housing markets tracked by Zillow, the company expects 238 markets to see positive home price growth between January 2023 and January 2024, while it expects six markets to remain flat and 156 markets to notch a home price decline over the next 12 months. Simply put: Zillow expects only 39% of major markets to post a home price decline over the coming year.
"Many markets may have already seen [house] prices bottom out, and those price declines may be helping entice more buyers this spring," wrote Jeff Tucker, senior economist at Zillow, in a report published last week.
According to Zillow, tight supply will make it hard for home prices to fall much heading forward.
View this interactive chart on Fortune.com
Among the 403 largest housing markets tracked by Moody's, the company expects eight markets to see home prices, as measured by the Moody's Analytics Repeat Sales House Price Index, rise between the fourth quarter of 2022 and the fourth quarter of 2023. It expects the other 395 markets to notch a home price decline over the next 12 months.
In total, Moody's expects 98% of major markets to post a home price decline over the coming year.
By the time house prices bottom nationally, Moody's expects house prices to be about 10% below levels hit at the peak in June 2022.
"A close to 10% peak-to-trough decline in the Moody’s HPI repeat sales index [is our forecast]. This assumes fixed [mortgage] rates average close to 6.5% this year, and while the economy is weak, there is no recession," Mark Zandi, chief economist at Moody's Analytics, tells Fortune. If a recession were to manifest, Zandi's model would see that peak-to-trough national house price decline come in around 20%.
Why does Moody's expect home prices to continue falling? Zandi says prices are simply too far detached from underlying fundamentals like incomes.
View this interactive chart on Fortune.com
So what's actually happening to home prices, so far, in 2023? The chart above, which shows the shift from December 2022 to February 2023, gives us an idea.
An updated analysis of Zillow Home Value Index data by Fortune (see chart below), finds that 38% of the nation's 200 largest housing markets saw a month-over-month home price decline in February. That is far above normal levels for a February; however, it's well below last September when 79% of the major housing markets tracked by Zillow notched a month-over-month decline.
Through the first two months of 2023, the biggest home price drops were found in markets like Austin (down 2.5% since December), Boise (down another 2.4%), Las Vegas (down another 2.4%), Phoenix (down another 2.2%), and San Jose (down another 2.1%).
While many Western housing markets continue to inch down, many Midwestern and Northeastern markets are rising again. That includes places like Cincinnati (up 0.59% since December) and Chicago (up 0.57% since December). Unlike their Western peers, home prices in many Northern markets didn't become as detached from local income levels during the Pandemic Housing Boom.
Next week, Zillow will release regional house price readings for March. Here's an early look at the national March 2023 reading.
Want to stay updated on the U.S. housing market? Follow me on Twitter at @NewsLambert.
