This year, home values should see their highest appreciation levels yet—even exceeding pre-recession peaks by the time April rolls around, according to the latest Zillow Home Price Expectations Survey.
Overall, experts who participated in the survey said they expect home prices to jump 4.4 percent across 2017. Those prices will slow significantly by 2018, dropping to 3.4 percent, according to experts. By 2019 and 2020, they should fall to 2.8 percent.
“Panelists’ views were divided when separated into more optimistic and more pessimistic camps, especially when looking over the longer term,” Zillow reported. “Looking farther out, the most optimistic panelists said they expected home values to grow by a total of 26.7 percent from now through the end of 2021. Pessimists predicted total, cumulative home value growth of just 6.3 percent over the same time.”
Survey participants also said they expected the median home value to surpass peak numbers by April. Home values reached their highest point—$196,600—in April 2007.
As part of Zillow’s survey, experts also weighed in on what they see as the most impactful forces facing the 2017 housing market. Overwhelmingly, “rising mortgage rates and their impact on mortgage affordability” took the top spot.
“While still low by historical standards, as rates rise, monthly payments for same-priced homes will increase, and buyers’ budgets will be more strained,” Zillow reported. “Since 77 percent of buyers use a mortgage to finance their purchase, the market will likely not be able to sustain rapid home value appreciation.”
On average, participants said mortgage rates of 5.65 percent or more would be needed to effectively slow home value growth. About 22 percent disagreed, saying interest rates of 5 percent of less could impact values.
But home values aren’t the only thing rising mortgage rates will impact. According to Zillow’s report, they may influence desire to move, sell, and buy as well.
“As rates rise, not only will home value growth and affordability be impacted, but the ability and/or desire of current homeowners to sell and move to another home will be, too,” Zillow reported. “Rather than moving up, in a higher interest rate environment, many buyers may find that a home similar to the one they’re already living in—let alone larger or more expensive—would actually be less affordable than the one they currently own. As a result, they may choose to stay put and take advantage of the already low payment they’ve locked in.”
Other market-influencing forces mentioned in the survey included “continued lack of inventory,” “shifting demographics,” “policy shifts,” “slow income growth,” “widespread income growth,” and “construction activity.”