Zillow just raised its home price forecast, seeing a 3.7% jump in 2024, and it’s all because of ‘external factors’

Zillow said its revision is based on “external factors,” including a decline in mortgage rates and an improved inflation outlook from the Federal Reserve. In other words, it’s not a big change within the composition of housing itself or the activity of homebuyers—like some kind of huge rush of inventory or a sellers’ market suddenly morphing into a buyers’ market. The recent decline in mortgage rates means that monthly payments on a new mortgage for a typical home are now $1,790, which is $413 cheaper than in October 2023, Zillow senior economist Nicole Bachaud tells Fortune. 

“This unlocks some more buyers to be able to shop for a home if rates stay lower this spring, which will increase competition,” she says. An improved inflation outlook could mean mortgage rates “staying off their peaks and floating down to a small degree,” which would “also bring both buyers and sellers back to the market, putting some upward pressure on home prices.”

Redfin also reported on Thursday that home prices were up 5.1% during the four weeks ended Jan. 21, the biggest increase since October 2022. Asking prices were up 6.5%, also the largest jump since October 2022. However, Redfin predicts a 1% decline in home prices year over year in the second and third quarters of 2024, marking the first time prices would decline since 2012, chief economist Daryl Fairweather tells Fortune.

“However, there is much uncertainty,” she notes. “Although I think a price decline is more likely than a price increase, a price increase is still possible.”

Historical home price increases

Although Zillow predicts that home prices will increase this year, 3.7%…