According to Zillow, house prices will continue to skyrocket in 2022 with hot markets posting gains of 25% plus. What factors are driving these predictions? How accurate are Zillow's 2022 predictions for appreciation? How does Zillow’s estimates compare with the National Association of Realtors?
What does Zillow say about appreciation in 2022?
Growth in home values will exceed 14% nationally through November, the real estate app predicted in an analysis of the “hottest housing markets” released Tuesday with "hot markets" increasing at 25%+ Economists at Zillow anticipate price appreciation and high sales volume to continue in 2022, especially as millennials look to buy their first homes and baby boomers eye retirement destinations.
How accurate is this prediction from Zillow?
I’m a bit skeptical as Zillow was spending millions buying houses, overpaying and ultimately lost a ton of money as they were way too optimistic on their values. Zillow abruptly shut down Zillow offers to stop the bleeding/losses. Remember Zillow makes its money primarily from realtors buying leads from them/advertising. It would not be in Zillow’s best interest to predict a crash as this would impact their bottom line. With that said, I think Zillow is a bit optimistic on their predictions.
What are other experts saying about appreciation in 2022?
The National Association of Realtors in their 2022 housing market report predicted a 2.9% rate of appreciation nationally with “hot markets” closer to 7-10%. I think this is a bit more reasonable estimate than what Zillow is predicting for three reasons:
I’m skeptical of Zillow’s predictions as you should be. If Zillow were so confident that prices would continue to increase at the torrid pace, then why would they abruptly quit Zillow offers and firesale the houses they have bought through wholesalers? Let’s take Denver for example. Denver was one of Zillows biggest markets for instant offers, assuming their predictions are correct Denver should rise somewhere between 15-20%. Instead of selling all the houses via a firesale, why would Zillow not wait 6 months and sell each one at a substantial profit (20% plus from where they bought the houses. Zillow, has a strong balance sheet with plenty of cash so liquidity was not an issue. Unfortunately, Zillow is not putting its money where its mouth is and their predictions are extremely optimistic. Their motivation for the optimism is to drive further revenue growth. I would not take Zillow’s estimates to the bank and neither should you.