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This summer, the U.S. housing market entered into a sharp slowdown. That only intensified last month. On a year-over-year basis, new-home sales and existing-home sales are now down 17.4% and 20.2%, respectively. While single-family housing starts and mortgage purchase applications in July were 18.5% and 18.4% below levels they hit a year ago. Simply put: One-fifth of housing activity just got shaved off.

That sharp contraction in the U.S. housing market—something both the National Association of Realtors and the National Association of Home Builders are calling a “housing recession”—has economists rethinking their 2023 housing forecasts. On Thursday, Zillow became the first real estate firm to use the sour July housing data to readjust its outlook.

Over the next 12 months, Zillow now predicts that U.S. house prices will climb just 2.4%. That’s down from the 7.8% it forecast just a month earlier.


If the year-over-year rate of national home price growth—which hit 19.7% in May—decelerates all the way to 2.4%, it will mean several markets post falling home prices. That’s exactly what Zillow’s revised forecast predicts. Back in July, Zillow economists predicted five regional housing markets would see falling home prices over the coming year. Now Zillow economists predict 123 regional housing markets will see falling home prices. In all, Zillow analyzed 911 markets.