Please ensure Javascript is enabled for purposes of website accessibility

Buying a Home? Zillow Thinks Home Prices Will Fall This Year

By Howard Smith - May 4, 2020 at 6:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Zillow sees a sharp drop in home sales leading to a decline in prices for the year.

Real estate marketplace platform Zillow (Z 2.96%) published a report today saying it believes home prices will dip 2% to 3% this year from pre-coronavirus levels, with prices returning to the levels seen at the end of 2019 by the third quarter of 2021. The company believes the price depreciation will result from a decline in total home sales of between 50% and 60% from the levels seen prior to the COVID-19 pandemic. 

In what it believes to be the most likely of several scenarios outlined in the report, Zillow predicts that sales could rebound at a rate of about 10% per month after the initial plunge, as a quick economic recovery follows a short-term recession when the economy reopens. 

diagram of houses with down arrow indicating drop in housing sales and prices

Image source: Getty Images.

At the end of April, the National Association of Home Builders (NAHB) said that home builder confidence in 55 markets dropped to its lowest level since the fourth quarter of 2012. 

In its most optimistic scenario, Zillow foresees a drop in home prices of up to 2% this year, which would quickly begin to recover in 2021. Zillow's most pessimistic scenario, however, predicts a slow economic recovery with a potential second wave of COVID-19 spread that could result in home prices being depressed up to 4% through 2021. 

Since the Great Depression of the 1930s, nationwide home prices have only fallen during one other time in modern U.S. history, after the subprime mortgage crisis and the Great Recession a decade ago, according to CNBC.

Zillow also noted that there remain public health and policy risks that could cause an adjustment of its predicted scenarios if conditions worsen. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zillow Group (C shares). The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zillow Group, Inc. Stock Quote
Zillow Group, Inc.
Z
$39.63 (2.96%) $1.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.