Zillow's 2026 Forecast Is a JOKE. Prices Are Already Crashing 20%

Zillow, the behemoth of the real estate market, has updated its price prediction for 2026. And there's a lot of reasons why, and you need to understand what's coming down the pipeline. And should we even believe Zillow as they continue to push narrative that things are great and prices will continue going up with many of us on the ground actually know there's more inventory coming on, prices are coming down. So, let's dig into the data and why Zillow is making these positive predictions on the housing market when every indicator out there points to a horrible year for 2026.

Let's dig into what they are saying and what is going on. So, Zillow provides a forecast every couple months and it's price forecast for 400 markets was just revised upwards where they expect home prices to rise 1.2% over the next 12 months. Now, this is a slight increase, noting that prior in the year, the the forecast was actually less. But look at this map here.

This is where they're expecting there to be still some pain and uh most of the areas they're looking to be actually flat in a stabilizing market. So, here's the revisions that change. So, Zillow Economist just published their 12-month forecast projecting that prices according to their Zillow home value index. And trust me, I like Zillow because they have all the data.

First off, they have this incredible website where they track every single piece of information on nearly every single property. They even have the property photos. They have the 3D tours of these houses. They know what they're selling for.

And more importantly, they actually know what's coming down the pipeline because they're able to watch how many views are we getting on every property, how many saves are we getting on every property. They even own the company showing time, which is what agents use to go schedule showings. So, they know how many showings are occurring with every single property. So they have an incredible advantage of data just because they're so connected to the consumer.

Nearly every single consumer in the United States is on the Zillow app every single month, which is wow. They have over 300 million active users every single month. So their original forecast for the next 12 months heading into 2025 was an increase of the entire United States. And I just want to be clear on that.

We're not talking about specific geographic areas. This is for the entire US was to increase two. However, you know, it softened faster than Zillow was expecting and Zillow had several downward revisions and by April 2025, they'd cut the forecast to actually a negative 1.7%. However, just recently, they stopped issued issuing those downward revisions and they actually increased the revisions to a 12-month outlook of plus4% and now reversing that output uh outlook to 1.2.

2%. So in the last just couple months, Zillow has seen a revergence of be of buyers coming back to the table because home buyers are actually starting to fre home sellers are freaking out and starting to cut their prices to actually get their property sold because we are truly in an affordability crisis. So here's the positive chart overall. This is Zillow's forecast for metro level home price change between August 2025 and August 2026.

So the next 12 months. You can see here if it's in red, that's a downward revision. And if it's in blue, then it's an upward revision. But ultimately, you can see, you know, the south is going to continue to be flat or down, and the north is going to be flat or up, and the west looks like there's going to be trouble depending on where you're located.

But their predictions are based off of a ton of data that they're seeing come across. But just like we talked about, they revise what they see nearly every single month. And so, take it with a grain of salt. They've been off themselves.

The person with the most data, they have been completely wrong in their forecasts and that's why they have to continue to keep updating them based on what they see every single month because it does swing. I mean, if you're swinging from negative 1.4% to plus 1.2%, you know, that could just be a spike of home builders offering massive amount of incentives before their year end in that basically that inventory lumping up because builders are buying down interest rates all the way to the three to fours to make that monthly payment affordable for consumers. So, where are they seeing the most strengths over the next 12 months? Right?

New Jersey, Connecticut, Michigan, Pennsylvania, Illinois, New York, New Hampshire, right? So, positive areas up north is primarily where they're going to see this growth. And why is this? Because they have limited supply of inventory.

There wasn't this massive speculation over the last couple of years. And their permitting rules and everything is a little bit more challenging for them to continue to build, right? So, and people actually who relocated to the south during those prior years are now actually relocating back either because of job loss, they want to be closer to family, there was a culture shock, things like that. So, you're actually seeing people move back to where they came from uh during the 2020 to 2024 years, which I think is pushing it up.

And there's uh you know, ultimately we're just going to continue to see that actually play out. I think there will be limited inventory in the Northeast. They don't have the problems that the South has, but the South is in trouble. Here's the area of weaknesses, which they look at Louisiana, Texas primarily, and some areas in California that they look like we're going to have some stress coming on.

And this is where we've already seen pain. So, this is one-year change metro level home prices between August 2024 and August 2025. Florida was ground zero, especially South Florida. Jacksonville.

I know this index is showing that, you know, we're down about 5%. But in reality, when we look at the home prices, I mean, even new construction, they slashed it from 500 all the way down to 380. I mean, that is an incredible price reduction. We're talking about 20% plus price reductions in these houses to get them to move.

And they're offering the incentives on top of that. So, I don't know where they're getting 5% from, but we're also seeing existing homes used to sell for 450 are now selling for 380 as well on the existing side and the buyers are drying up and the listings are starting to stack up. So, I don't know where we've gone wrong in terms of Zillow's forecast, but we are totally disconnected on the ground of what Wall Street is projecting, right? So, Main Street is feeling something completely different than what Wall Street is sharing and that's a huge problem.

You can obviously see there's distress in Texas as well, especially Austin, Texas, which is down. I know it says it's down 5.8%, but my friends on the ground there say it's down 20%, 23%. So, I take, you know, this kind of price tracker with a grain of salt. I don't think it's very accurate.

And I think that the the pain is actually deeper in some of these areas than other areas. It's really hard when you're looking at basically median price homes as well because you could say, well, more higherend homes are selling and less lowerric homes are selling. So, how they do the calculations of these price changes yeartoear could just be a factor of there's more higher price homes selling versus lower price. But that doesn't mean that the prices overall haven't actually fallen.

So, I think there's some issues with the calculations and how they do it. You have to pick a way to calculate it. Of course, there's going to be problems with every single one, but I just don't see the connect between their data and what we're actually seeing here on the ground, especially in Florida. So, here's my thoughts.

Okay, there are main regional differences across the north versus the south. We cannot talk broadly about an overall market increase because that is not how real estate works. When you are looking to buy or sell or invest in real estate, where you choose in a city, in which city you choose is extremely important to your investment. So there are large regional differences.

The north did not have the speculative overbuilding and new construction and the new construction incentives that compete with existing inventory and they're actually receiving migration back to where they came from. So they're going to benefit from that. There's a huge consumer debt bubble that's occurring, especially with the government debt bubble and there's tons of government intervention. You know, the uh Federal Reserve holds on its balance sheet $2.3 billion of mortgage back securities still in this environment.

They're rolling them off slowly, but still we have this massive intervention that's happening. Obviously, there's calls from the Trump administration to continue to drive down the Fed funds rate and hopeful hopefully that'll bring down mortgage interest rates as well. And we saw rates come down a little bit and then they popped right back up even with the weakness that we're seeing in the employment market. So here's the thing, if people don't have jobs, how can they buy a house?

So if the employment market starts to crater, that will really impact the housing market and consumers are loaded up with debt. We're seeing a ton of people have car loans, credit card issues, and it's it's adding up and they're not able to qualify for even refinances. So refinances are down even with rates coming down a little bit. Prices coming down.

However, this is the good thing and I do agree with Zillow on this. Prices coming down will be really important to bring buyers back into the market because that'll help affordability. So, if we see some prices come down, we will see buyers slowly edge back into the market. Unless there's some sort of panic break moment that happens in the bond market, which you know, a lot of people even like Ray Dallio say, "Hey, we're going to have in the next three years some sort of crisis event in the bond market that's going to tank the the stock market.

People are going to be scared that's obviously going to overflow into the housing market. And the biggest question mark of all because affordability is the number one factor that impacts real estate and where prices are going next is where will interest rates be next year. Will we see them rise because of inflation coming up? Will we see them fall because employment is starting to weaken?

Where will we end up? But the government keeps printing. Congress keeps spending money like a drunken sailor. There's no accountability around it.

The Fed keeps uh printing money basically um by borrowing and lending out and creating liquidity events in the market. So the question is where will we end up in a in a couple years from now? I'd love to hear from you. What do you think is going to happen next year?

Do you believe at all based on the charts that I've shown you and the maps? Is that actually what you're experiencing on the ground? Because I can tell you Zillow's data that they have in their projections moving forward is not at all what we're experiencing here in Jacksonville. The in Florida we are seeing definitely a spike in new construction sales recently because they bringing the price down 20% offering these incredible incentives for people to get in but that screws over the people who were who bought in phase one and phase two and now they're underwater $100,000 and if they bought FHA or VA with a little bit of money down they're underwater a significant amount that they won't be able to get out of.

So, we think we'll see distress specifically in the south in these new construction communities where the buyer put a small percentage down and the builder is cutting rapidly to get new buyers to finish the community. So, I'd love to hear what you think. Let me know what you're seeing on the ground. And as always, thanks for following.

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