Why Zillow Is Likely Wrong Again About Its Housing Price Forecast

If you’re even mildly obsessed with real estate, you’ve probably checked your home’s value on Zillow more often than you check your bank account.
And lately, Zillow’s economists have been busy telling us that the housing market will stay “modestly positive,” with U.S. home values expected to grow only around 1.2% and sales slowly ticking higher in the next couple of years.
It sounds calm, orderly, and reassuring like the real estate version of chamomile tea.

The problem? Zillow has a long history of being surprised by reality.
From over-optimistic price predictions to its spectacular iBuying failure, the company’s models have repeatedly struggled to keep up with an economy, rate environment, and climate risk picture that change faster than a weekend open house.

This doesn’t mean Zillow is useless far from it.
But it does mean you shouldn’t build your financial future on a forecast that’s designed to be neat and smooth in a world that’s messy and lumpy.
Let’s dig into why Zillow is likely wrong again about where home prices are headed, and what you should do instead.

Zillow’s Latest Housing Forecast in Plain English

Recently, Zillow’s economists have been telegraphing a “soft landing” story for home values:

• National home values: expected to edge up about 1.2% over the next year or so basically flat with a tiny positive tilt.
• Existing home sales: projected to rise modestly from the trough levels seen when mortgage rates spiked, as rates ease and more owners finally list.
• Affordability: forecast to improve slowly as incomes grow and financing costs come down, restoring some balance between buyers and sellers.

In other words, Zillow is calling for a gentle, almost boring market: no big crash, no huge boom, just a slightly better environment for buyers and sellers who’ve been stuck in the “high rates, no inventory” standoff.

On the surface, that sounds reasonable. The Federal Reserve is signaling a slower, more cautious approach to interest rates.
Wage growth has been decent in many sectors, and supply while still tight nationally is no longer collapsing the way it did during the pandemic frenzy.

But housing isn’t just a math problem. It’s a messy combination of psychology, policy, local economies, climate risk, and insurance costs.
That’s where Zillow’s neat curves start to look suspicious.

Zillow’s Track Record: Great Website, Not a Crystal Ball

Before you decide whether to trust a forecast, always ask:
“How did they do last time?”

Optimistic Calls in a Volatile Market

During the early 2020s, Zillow consistently called for strong home price growth sometimes double-digit as the pandemic boom took off.
In late 2021, for example, its economists were projecting eye-popping annual growth figures, expecting another year of very strong appreciation on top of the 2020–2021 surge.

Then mortgage rates started jumping.
Demand cooled, inventory rose in some markets, and the relationship between buyers and sellers flipped far faster than most models anticipated.
Zillow, like most forecasters, had to scramble to revise expectations down.

The iBuying Fiasco: When the Model Met Reality

Zillow’s most infamous “oops” wasn’t just a bad forecast on paper it was a multi-hundred-million-dollar real-world mistake.

Through its iBuying division, Zillow Offers, the company used its valuation algorithms to buy homes directly, intending to flip them for profit.
It worked great… until it didn’t.

As the market cooled, Zillow’s models kept overvaluing properties.
The company overpaid for thousands of homes, got stuck with expensive inventory, and ultimately shut down the entire iBuying business after swallowing hundreds of millions of dollars in losses and laying off staff.

The CEO later admitted that the “error rate” of their pricing model in a volatile market was much higher than they expected.
If an algorithm struggles that badly in one segment of the market, it’s a red flag for trusting the same underlying valuation logic for long-term national forecasts.

The Zestimate Problem

Zillow’s famous Zestimate is a useful starting point for a home’s value and a great way to start an argument at a dinner party.
But it’s not a guaranteed fair-market price.

Journalists and researchers have repeatedly noted that Zestimates can be off by meaningful amounts, especially in:

• Neighborhoods with highly unique properties instead of cookie-cutter homes.
• Areas with fast-changing demand (for example, when a new employer arrives or leaves).
• Regions facing new climate or insurance risks that the model hasn’t fully priced in.

If the underlying estimates for millions of properties are noisy, any forecast built on that data is going to be noisy too even if it’s wrapped in smooth graphs and decimals.

Why Forecasting Home Prices Is So Hard (Even for Big Tech)

To be fair to Zillow, nobody is consistently “right” about national home prices.
Forecasts from Fannie Mae, Freddie Mac, the National Association of Realtors, and Wall Street firms are regularly revised as new data on jobs, inflation, and rates comes in.

A few big reasons housing forecasts so often miss the mark:

1. Mortgage Rates Are Wildcards

Even professional forecasters have been repeatedly surprised by interest rate moves.
Economists who predicted lower mortgage rates one year ended up revising those expectations upward when inflation data came in hotter than expected and the Fed kept policy tighter for longer.

Because housing is so rate-sensitive, a small change in mortgage rates can have an outsized impact on:

• How many buyers can qualify for a loan.
• What price they can afford.
• Whether current homeowners feel “locked in” by low existing rates.

Forecasts like Zillow’s, which assume a gently improving affordability path, can be upended quickly if the rate outlook changes.

2. National Numbers Hide Local Chaos

Zillow often emphasizes national home value indices which, by definition, smooth out the wild swings happening in individual cities and neighborhoods.

But beneath that calm surface:

• Some Sun Belt and Mountain West markets that boomed during the pandemic have seen prices level off or decline.
• Other metros, especially those with strong job growth and limited buildable land, are still posting solid year-over-year appreciation.
• In certain Midwestern markets, nearly half of homes have seen their values decline over the past year, even though long-time owners are still ahead thanks to earlier gains.

When large shares of homes in specific regions are losing value, it’s hard to tell a clean story about a gentle, uniformly positive national trend.

3. Climate and Insurance Are Game Changers

Climate-related risks floods, fires, hurricanes and the associated insurance costs are increasingly shaping the housing market.
Some properties that looked like long-term winners a decade ago now face:

• Soaring insurance premiums.
• Reduced coverage or insurer withdrawals from entire regions.
• Growing concerns about future resale value.

Real estate platforms have struggled with how to present this risk.
Zillow, for instance, removed certain climate-risk scores from listings after pushback from parts of the real-estate industry and now points users to third-party resources instead.
Redfin and others still highlight climate risk data more prominently.

The key point: if a forecast doesn’t fully price in the long-term financial impact of climate and insurance risk, it may paint too rosy a picture of future home values in vulnerable areas.

Red Flags in Zillow’s Current Forecast

Red Flag #1: Smooth Lines in a Jagged Market

Zillow’s call for roughly 1.2% home value growth over the next year sounds tidy but the real world isn’t.

We’re already seeing:

• Flat or mildly declining home values in parts of the Midwest and South.
• Stretched affordability in coastal and “boomtown” metros where local buyers simply can’t keep up with prices.
• Markets where the early 2020s price surge is now being partially unwound as higher rates bite.

When you average all that together, you get a number like “+1.2%.”
But that doesn’t mean most homeowners will see their Zillow estimate quietly tick up by 1.2% next year.
Some may fall 5–10%; others might still rise 4–6%.
A smooth national number can be misleadingly comforting.

Red Flag #2: Affordability Is Still a Wall, Not a Speed Bump

A recent analysis of U.S. listings found that more than three-quarters of homes on the market are unaffordable for a typical household earning around the median income.
In many major metros, buyers would need six-figure salaries to “comfortably” afford a median-priced home and that’s before student loans, childcare, or car payments.

In that environment, it’s hard to see how home prices march higher in a broad, sustained way unless:

• Mortgage rates drop materially and stay low.
• Incomes rise faster than they have been.
• Or prices come down (either outright or in inflation-adjusted terms).

Zillow’s forecast leans heavily on the first two helping out.
But those are big “ifs” in a world where inflation sometimes re-accelerates and the Fed keeps its options open.

Red Flag #3: Zillow Keeps Flipping Its Story

One of the clearest signs a forecaster doesn’t really know what’s coming (again, to be fair, nobody does) is frequent, dramatic revisions.

In just the last couple of years, Zillow has:

• Called for flat or slightly negative national prices.
• Upgraded its forecast to mid-single-digit gains for the following year.
• Then turned more bearish again, projecting price declines over specific future windows.

If you’d tried to time a purchase or sale based solely on those changes, you would’ve felt like you were riding a rollercoaster in the dark.

That’s not a knock on Zillow’s analysts as people; it’s just a reminder that their models are reacting to new data, not reliably predicting it.

How Zillow’s Forecast Compares to Other Outlooks

Zillow isn’t the only one with opinions about where home prices are going.
Banks, mortgage companies, think tanks, and government-backed agencies publish their own forecasts, and they don’t always agree.

For example, in recent years:

• Fannie Mae and Freddie Mac have sometimes projected modest national price gains while others called for flat or slightly negative growth.
• Trade groups like the National Association of Realtors have tended to emphasize long-term housing demand and undersupply.
• Private-sector analysts have split between “slow deflation” and “sideways grind” scenarios for prices, depending on their view of rates and the economy.

The takeaway isn’t that one of these players is “right” and Zillow is “wrong.”
It’s that the range of reasonable outcomes is wide.
When you see a single precise number “home values will rise 1.2%” remember that it’s sitting on top of a cone of uncertainty that’s much larger.

What You Should Do Instead of Worshiping a Forecast

Okay, so if Zillow’s housing price forecast isn’t a magic answer, how should real people actually use it?

1. Treat It as One Input, Not the Gospel

It’s fine to read Zillow’s forecast.
Just put it in a lineup with:

• Other national forecasts (Fannie Mae, Freddie Mac, major banks).
• Your local market data (median days on market, price cuts, new listings).
• Your personal finances (job security, savings, time horizon).

If multiple sources are saying “flat to slightly down,” it’s more persuasive than Zillow alone saying “modest growth forever.”

2. Focus on Local Supply and Demand

National averages are interesting. Your zip code is what matters.

• Are homes in your area sitting on the market longer or still getting multiple offers?
• Are price cuts becoming more common?
• Is there a major employer expanding or shrinking nearby?
• Is new construction adding meaningful competition to existing homes?

These local factors will move your home’s value far more than a national 1–2% number.

3. Run Scenarios, Not Just a Single “Plan”

Instead of assuming Zillow’s forecast is right, ask:

• What if prices are 5% higher in three years?
• What if they’re 5–10% lower?
• What if rates are still elevated?

Then stress-test your decisions:

• Would your budget still work if you had to sell into a softer market?
• Are you stretching to buy based on the assumption that your home “has” to go up?
• Could you rent the property out and break even if you needed to move?

If your plan only works in Zillow’s best-case scenario, that’s a problem.

4. Think in Terms of “Live-In Value,” Not Just Price

Housing is both an investment and a consumption good.
You live in it, sleep in it, raise kids in it, store your embarrassing hobbies in the garage.

Even if Zillow is wrong and your home’s price doesn’t climb the way the model suggests, it can still be a good decision if:

• You can comfortably afford the payment.
• You plan to stay long enough to ride out cycles (7–10+ years).
• The home supports your quality of life (commute, schools, community).

Zillow can’t quantify that. You can.

Real-World Experiences with Zillow Forecasts and Zestimates

To see how Zillow’s housing price forecasts can mislead in practice, it’s helpful to look at how regular homeowners, buyers, and even professionals have experienced them.

Consider the classic “Zestimate shock” story: a homeowner logs into Zillow after a few months of rate hikes and is thrilled to see their home’s value barely budged from last year’s peak.
Encouraged, they decide to list at or above the Zestimate, assuming demand is still there.
But when the house hits the market, showings are slow.
Buyers are running the numbers with current mortgage rates, not last year’s, and suddenly the monthly payment looks a lot scarier.
After a month, the seller cuts the price. Then again.
Eventually, the home sells closer to where recent closed comps suggested it should have been priced in the first place well below the optimistic Zestimate.

On the other side of the table, some buyers treat Zillow’s national and metro-level forecasts as a reason to wait forever.
They see a projection for only small price gains (or even slight drops) and think, “Great, I’ll just sit out another year. The market is going to soften.”
But in many neighborhoods, especially those with tight inventory or strong local job markets, that “flat” forecast turned into yet another year of small but real price increases.
Combine that with higher borrowing costs for longer than expected, and those buyers found themselves chasing the same house at a higher total cost of ownership.

Real estate investors have their own stories.
Smaller “mom-and-pop” landlords who leaned too heavily on Zillow’s appreciation assumptions sometimes bought properties that only penciled out if rents and values kept rising on schedule.
When financing costs rose and growth slowed, those deals suddenly looked thin.
In contrast, investors who underwrote deals using more conservative scenarios essentially assuming Zillow’s optimistic cases might be wrong tended to sleep better at night.

Then there’s the corporate-level cautionary tale: Zillow Offers.
The iBuying venture was, in a sense, a giant real-money stress test of Zillow’s pricing and forecasting engine.
When conditions were smooth and demand was booming, the model worked well enough to justify large-scale buying.
But once the market turned and volatility spiked, the error rate exploded, leading to overpayments, write-downs, and a hasty retreat from the business entirely.
If a sophisticated, data-rich company can lose hundreds of millions of dollars using its own pricing forecasts, that should give individual buyers and sellers pause before treating those same models as infallible.

None of these experiences mean Zillow is “bad” or that you should never look at its estimates and forecasts.
What they do illustrate is that these numbers are tools, not guarantees.
Homeowners who use Zillow as a starting point then layer in local comps, conversations with experienced agents, and their own financial goals tend to make more grounded decisions.
Those who treat Zillow’s housing price forecast as destiny often end up frustrated when the real world refuses to follow the script.

Bottom Line: Use Zillow, But Don’t Obey It

Zillow’s housing price forecast is polished, data-driven, and easy to digest.
It’s also just one model’s best guess about an incredibly complex system a system influenced by rates, wages, climate, policy, psychology, and plain old human behavior.

The company’s track record, from aggressive pandemic-era optimism to its costly iBuying misadventure, shows that its models can get blindsided, especially when conditions change quickly.
Its current call for modest, orderly price growth sounds nice, but it glosses over serious affordability challenges, regional divergences, and emerging climate and insurance risks.

So check your Zestimate. Read the forecast. Enjoy the charts.
Then make your housing decisions based on a wider lens: your local market, your personal finances, multiple independent forecasts, and a healthy dose of humility about how unpredictable the future really is.

Zillow is a great website. It’s just not a time machine.