Slowing monthly appreciation is not expected to be echoed in slower annual growth until early 2022, with year-over-year growth in the Zillow Home Value Index expected to end 2021 up 19.9% from the end of 2020 and continue accelerating to 20.1% in January 2022 before beginning to slow down. Additionally, the number of completed existing home sales this year is expected to be higher than previous estimates, exceeding 5.9 million sales in 2021.
Zillow economists expect the typical U.S home value to increase 4.7% over the next three months (August-November), and to end August 2022 up 11.7% from August 2021. Both the three-month and 12-month home value forecasts have been revised downward from last month, when we expected 5.2% growth from July-October and 12.1% growth from July-July. The small downward revisions were influenced, in part, by recently slowing monthly home value appreciation and continued increases in inventory that should contribute to a modest rebalancing in the market between buyers and sellers. The home value forecast was also influenced by the possibility of rising mortgage interest rates over the longer-term, which may serve to slightly dampen growth in housing prices.
Our expectation for existing home sales, on the other hand, has improved compared to last month. Zillow expects a total of 5.93 million existing home sales in 2021, up 5.1% from 2020 (on its own the strongest year for existing home sales since 2006) and higher than the 5.89 million sales in 2021 that we expected last month. Strong sales growth in July helped nudge our outlook through the end of the year higher, though the possibility of diminished housing affordability (through both higher prices and potentially higher mortgage rates) and a continued slowdown in household formation continue to weigh on the longer-term outlook.