In February, Zillow economists made a bold call that U.S. home prices had bottomed and would proceed to climb 0.5% over the next 12 months.
In the months that have followed, U.S. home prices as tracked by the Zillow Home Value Index have stopped falling, and between February and June rose 4.8%. That rebound coincided with Zillow repeatedly revising its home price forecast upward. Its latest revision predicts that U.S. home prices will rise 6.3% between June 2022 and June 2023, above the 5.5% annual increase that national home prices have averaged since 1975.
"The second quarter is traditionally the hottest time of year for the for-sale housing market, and that rule proved true in 2023. What comes next is less certain, as buyer demand typically begins to wane in the summer. But this year—like a test of the classic unstoppable force meets an immovable object paradox—that trend will be set against incredibly scarce new listings," wrote Zillow economist Jeff Tucker in his latest report.
In the eyes of Zillow economists, the lack of homes for sale—which has been constrained by homeowners refusing to part with their ultralow mortgage rates—has supported home price growth even as spiked mortgage rates have created a sharp pullback in buyer demand.
View this interactive chart on Fortune.com
While Zillow economists expect national home prices to rise 6.3% over the coming 12 months, their forecast model predicts that 48 of the nation's 200 largest housing markets will see increases of 7.0% or greater over the next 12 months.
Why is Zillow bullish on these 48 regional housing markets?
There isn't just one unifying factor—these 48 housing markets are located all over the country. They're spread over the West (like San Luis Obispo, Calif.), South (like Baton Rouge, La.), Midwest (like Springfield, Mo.), and Northeast (like New Haven, Conn.).
But most of these markets do have two things: Tight inventory levels, and less deteriorated affordability. While housing affordability has deteriorated across the country, these 48 markets didn't get as extended beyond local fundamentals as zoomtowns like Boise and Austin.
View this interactive chart on Fortune.com
While Zillow thinks U.S. home prices have bottomed—something that economists at CoreLogic and the AEI Housing Center also believe—not every firm agrees. Firms like Moody's Analytics and Morgan Stanley think U.S. home prices have a little more to give up, and it's supposed to happen as the market enters into the seasonally slower second half of the year.
In terms of forecast models, Zillow's model is consistently on the bullish side. At the height of the pandemic housing boom last spring, Zillow economists remained bullish and predicted that national home prices would skyrocket another 17.8% between February 2022 and February 2023. The actual result? National house prices, as measured by the Zillow Home Value Index, rose 4.4% between February 2022 and February 2023.
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