Its Home Price Expectations Survey of 108 experts calls for a 4.1% rise in home prices next year, up from the 3% that a similar panel forecast for 2018 a year ago.
The number one reason for the expected rise is the continued tight supply in many markets with 33 months of falling inventory on a year-over-year basis.
The expert panel is not forecasting relief for pressured buyers next year with only 16.7% believing that supply will increase.
"The American labor market is stronger than it's been in decades and Americans, particularly young Americans, are increasingly feeling confident enough to buy homes," said Zillow senior economist Aaron Terrazas. "Home building has not kept pace with this surge in demand and remains well below historical norms. We don't expect that these demand-supply imbalances will fundamentally shift in 2018:
Mortgage rates are expected to rise to a median of around 4.5% from the current level of around 3.92% with a range of between 4.28% and 4.7%.
Higher mortgage rates will eat into buyers' budgets, putting even more price pressure on the most affordable homes for sale. Unless there is a fundamental shift in the number and type of homes for sale, this is the new normal of the American housing market," added Terrazas.
More market update:
Home prices should grow more in 2018 than experts previously expected, a survey by Zillow reveals.