Here’s Zillow’s Home Price Forecast for the 100 Largest U.S. Markets. Hint: California is Struggling Knoxville, TN, and Tampa, FL, are projected to have the highest growth. San Francisco and San Jose, CA, are on the decline.

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If you’ve been following the news for the past couple of years, you would know that predicting what the housing market, or what any economic market will look like in the future, is nearly impossible.

The economies and the various markets across the world, from European energy to Chinese real estate, have been wild.

But, regardless of the uncertainties, humans tend to like predicting the future, as bad as we typically are at doing this. That said, Zillow released its latest home value forecast through August 2023, highlighting where the largest U.S. markets are trending.

Below, you’ll find a chart of the largest 100 markets in the U.S. and their projected home value change based on Zillow’s Home Value Index.

Where the Largest 100 Markets Are Heading

As you can see in the chart, many markets will still see appreciation year-over-year (YoY), while some are starting to drop off. Zillow’s forecast for the U.S. as a whole is 1.4, which is down from the 7.8 that they forecasted in July.

What’s changed since then? The Fed has continued to push interest rates up and has signaled that the end isn’t near as long as inflation continues to run rampant. While inflation has fallen from its peak slightly, August’s CPI report still pegged price growth at 8.3% YoY. That’s unsustainable, obviously.

According to Zillow, Wooster, Ohio (not featured in the top 100) will see the largest growth in home values, at 12.8. The largest decrease will be in Fairbanks, Alaska (not featured in the top 100) at -7.

Among the largest 100 markets, the highest growth is projected in Knoxville, Tennessee, and Tampa, Florida, at 5.3. San Jose and San Francisco, California, are projected to have the sharpest decline among the largest markets, at -4 for each.

Knoxville’s housing market is up 23% YoY with a median sales price of $319,000. However, demand is waning. Homes sold above list price are now down to 42.4%, 10.5% lower than August 2021. Despite this, Zillow still forecasts the market to grow more than other markets.

Why? Supply and demand. We still have a major supply issue, and despite demand falling as much as it is, it goes to show how little supply has been. Median Days on Market in Knoxville remain lower than pre-Covid levels at 41 days.

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Waning Demand Doesn’t Mean the Housing Market is Crashing

Falling demand will naturally lower prices as sellers compete more to sell their homes. But that doesn’t create a crash on its own and doesn’t indicate a cataclysmic crash like 2008.

Sure, prices fell by 33% during the Great Recession, but that was after mass defaults created by a subprime lending crisis that spiraled out of control. Today, many homeowners have locked-in low fixed interest, 30-year mortgages that are within the bounds of their affordability due to stricter regulations from the Consumer Finance Protection Bureau, a government entity that did not exist until 2011.

In other words, declining prices, especially at the rate they’re going (slowly), mean little in the grand scheme of things. If anything, we should expect this as a natural byproduct of free markets, although the Fed has definitely played its hand at making sure consumers stop spending money.

In April, Dave Meyer predicted that a housing correction would be in the ballpark of 5-10% in price declines if there were to be a correction. This was prior to the larger interest rate hikes that slowed down the summer. As of September 2022, according to Redfin, national median home prices have fallen from $430,000 in May to $406,000 in August. That constitutes about a 6% decrease. 

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But when we consider markets like San Francisco, where median home prices peaked at $1.6M in April and have since fallen by 24% to $1.3M, there are clear disparities across U.S. markets. San Francisco, as well as several other Californian markets, may very well have their own mini-housing crises, but could that echo across state boundaries? I’m not so sure.

Those markets were overinflated beyond what the traditional American family could afford. Moving into those cities, unless from somewhere else in California, was next to impossible. While many migrate out of California, few move in, creating a demand issue much greater than what other markets are experiencing, sending prices on the decline much faster than the likes of more affordable places like Pittsburgh, Pennsylvania.

Final Thoughts

The best way to use the data above is to determine where you want to invest your money. Remember, forecasts aren’t always accurate and are revised constantly, but they can be used for making reasonable assumptions that a market may perform better or worse over the next few months to a year.

Of course, do your research. Find the population trends, business growth, and other internal market dynamics before picking an investment spot, but use this as a quick starting point.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.