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Zillow did it again. They actually downgraded their housing market forecast over the next 12 months as of May 2022. This is thanks to a new report they just announced.

This is according to Zillow, as of the 19th of May 2022, And it says here, "Zillow's housing market outlook has been revised down." And by the way, this is the second consecutive month that they have decreased their housing market forecast over the next 12 months. So Zillow is now forecasting for an 11.6% increase in home values over the next 12 months. And this is for May 2022 to April 2023. And looking back at their previous forecast, which was posted on April 20th, they said a gradual cool down is going to occur this spring. So one month ago they were forecasting for home values to increase by 14.9% over the next 12 months. However, on their most recent forecast, they're calling for only an 11.6% increase.

On top of downgrading home values over the next 12 months, they also downgraded their predictions for home sales over the next 12 months as well. So it says here 5.73 million existing-home sales are expected in 2022 according to the latest forecast. That's a 6.4% decrease from 2021. So their previous forecast, which was last month, was calling for 6.09 million existing-home sales and not 5.73 million. So they basically decreased it by 300,000 houses.

Zillow is calling for a gradual slowdown in annual home price growth from the current pace of 20.9%, that's a year-over-year increase, to 11.6% growth rate through April 2023. Over the next three months, Zillow expects home values to grow by 5.2%. That's actually down from their expectation of a 5.5% growth rate in their previous housing market predictions.

They're a revised projection still represents a very strong housing market in the coming year. Annual home price growth has only exceeded the current year ahead, a projection of 11.6%. In other words, their projection over the next 12 months, for home prices to increase by 11.6%. This 12-month projection has only exceeded the recent run of record-breaking growth that we saw in 2021 and during a several-month stretch in 2005. And while 5.73 million existing-home sales would be a decrease from the remarkably strong 2021, that would mark the second-best calendar year total since 2006. So again, they are forecasting for home sales to be 5.73 million over the next 12 months.

According to the National Association of Realtors. At the current sales pace, according to the realtor association, we would sell 5.6 million houses over the next 12 months based on the current sales pace in April. So basically Zillow is forecasting for that to be even greater than at 5.7 million. It's not as great as 2021 when we had approximately 6.1 million existing-home sales in the US, but stronger than 2020 and 2019.

The reason why Zillow has downgraded their housing market forecast though. It says due to spiking mortgage rates, inventory gains, in other words, more people listing their houses for sale, and lower than expected pending home sales and mortgage application data that drove the downward revision.

Realtor.com Housing Market Stats

Let's talk more about this because we're starting to see an increase of housing inventory across the United States. So realtor.com posted this yesterday as of May 24th 2022. They said new listings are still down 1% year to date in 2022. And active listings, which is another word for housing supply, were still down 17% year to date. However, look at the trend though, because for new listings for the week ending April 30th, 2022, we had an increase by 3% compared to one year ago. Then the following week it increased by one percentage point. And then now, the most recent stats we have, new listings are actually up 6% compared to one year ago. We also seen the same trend for active listings as well. We actually were down 3% for the week ending April 30th. We were actually flat for this week, but now for the most recent week here, we have a gain of 5% in active listings compared to one year ago. So in other words, Zillow is correct in saying that we're seeing gains in inventory, which is obviously a step in the right direction.

Redfin Stats

In regards to lower than expected paying home sales, here's the most recent stats we have from Redfin. This is for the four weeks ending April 15th, 2022. So the black line right here is for 2022. This blue line is 2019. The orange line here above is for 2021. So Zillow is saying we're having lower than expected paying home sales. That's actually true as well, because as you can see here, the number of pending home sales was basically on par with last year in 2021 through basically mid-April. And by the way, this is when mortgage rates started to increase greatly. It has started to peel away from 2021. So basically at the start of April, we were basically on par with 2021. At the time of this article May 2022 pending home sales, we're actually down 6.42% compared to 2021.

Pre-Covid Home Sales

However, it's very important to note how this year compares to 2019, pre-COVID though, right? So for this a week, we had 72,000 pending home sales, by this time in 2019, we had approximately 58,000. So basically we have more pending home sales than pre-COVID level. So in other words, right now we have more pending home sales compared to pre-COVID levels at this time in 2019.

Seller Mortgage Application Data

Seller Mortgage Application Data this was actually posted on the 18th of May 2022, was that mortgage applications decrease for purchase applications. These are for people submitting loan applications in order to buy houses. That actually decreased 12% compared to the previous week, and also decreased by 15% compared to the same week one year ago. 

This was actually just published yesterday, this is also according to the Mortgage Bankers Association or the MBA. Here they state mortgage applications for new home purchases decrease 10.6% in April. So that's compared to one year ago, also compared to the previous month, which is March 2022, mortgage applications to buy brand new houses decreased by 14%. So in other words, one would assume if there's going to be less people submitting loan applications to buy brand new houses, then one would assume that home buying activity or home buying demand is decreasing for new home purchases as well. What we don't know with this data though, when we're talking about mortgage applications, we don't know if that's going to translate into a home sale.

But in any case, according to the Associate Vice President Mortgage Bankers Association Joel Kan, he says, "New home purchase activity declined on a monthly and annual basis in April as a spike in mortgage rates, cool demand and home builders continue to grapple with rising costs, supply chain issues, and extended completion timelines. With a supply of existing homes on the market still at extremely low levels, the new home market is an important source of housing supply. However," a keyword there, because as I've made important to you guys, "The pace of construction has slowed in recent months." This is for single family houses, "The MBA's estimate of new home sales actually declined for the fifth consecutive month."

In regards to this though, it's going to be very interesting to see what happens though, because as of today, Wells Fargo's CEO says, "There's no question that the US is heading into a downturn and it will be hard to avoid a recession." I'll definitely keep you posted regarding that because according to Fannie May, they also are forecasting for a recession potentially in late 2022, but potentially also in the late half of 2023.

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