Enthusiastic Homebuyer Interest Powers Uptick in Spring Home Values
In a dynamic real estate landscape, experts discern the emergence of a familiar late-summer cooldown in the continually heated housing market. This insight, drawn from the latest Zillow market report, signifies the evolving trajectory of the industry.
While the surge in home prices persists across most prominent U.S. markets, the typical U.S. home value exhibited a noteworthy 0.9% climb from June to July.
Amidst the backdrop of relentless competition, housing inventory experiences an unprecedented downturn for this season, affording homebuyers additional time to meticulously explore and contemplate their prospective property acquisition.
Key Discoveries:
- Properties are spending a longer duration on the market compared to spring, yet significantly shorter than the interval in 2019.
- Homebuyers face limited choices for existing homes as inventory plunges to new nadirs for July.
- In every major metropolitan area, home values witnessed a rise from June to July except for Austin.
Zillow’s Senior Economist, Nicole Bachaud, reflects on this shifting landscape, stating, “The housing market is reverting to customary seasonal patterns, marking a positive outlook for buyers who navigated intense competition earlier this year. As summer ebbs away and children return to school, home hunting takes a back seat. Typically, those who persevere in the market gain a slight upper hand as autumn approaches. However, this year, sellers opt for a cautious stance, translating to fewer options and elevated prices.”
The nation’s typical home value experienced a 0.9% escalation from June to July—a vibrant momentum for this time of the year, albeit a step back from the robust 1.4% growth witnessed in the preceding two months. Currently standing at $349,679, the typical U.S. home value represents a 1.4% increase compared to last July, and an impressive 46% surge from pre-pandemic levels registered in February 2020.
Austin stood out as the singular major market where home values dipped by 0.5% from June to July.
The gradualest monthly growth in home values manifested in San Antonio (0.2%), Denver (0.2%), Birmingham (0.3%), and Memphis (0.3%).
Respite for Buyers Amidst Shifting Market Momentum
The moderation in monthly appreciation unveils the pendulum of market dynamics swinging in favor of buyers. Homes also prolonged their time on the market before securing contracts—12 days in July compared to 11 in June, and 10 in both April and May.
Moreover, the volume of newly pending sales decelerated, adhering to seasonal trends, and dropping by approximately 6.5% from June to July. Existing home sales experienced a 15% year-over-year decline due to challenges posed by affordability constraints and the dearth of homes on the market.
The number of listings sporting price reductions witnessed a minor uptick from June, maintaining alignment with pre-pandemic norms at around 22%.
Inventory Shortage Persists Amid High Mortgage Rates
In July, the total active inventory plunged by 15% compared to the previous year, marking a staggering 44% drop below July 2019 levels.
Bachaud clarifies, “Buyers should not anticipate a significant increase in available homes for sale on Zillow at any point this year beyond the current levels. Inventory will likely follow pre-pandemic trends and continue to decline.”
Understanding Homeowners’ Reluctance to Sell
Fresh research highlights homeowners’ persistent attachment to their properties. New listings of existing homes reached a new seasonal low-water mark, with approximately 336,000 homes coming to the market in July. This figure represents a striking 26% decrease compared to the previous July and a substantial 41% drop from pre-pandemic averages.
High mortgage rates remain a pivotal factor contributing to this scarcity in new listings. A recent Zillow survey underscores the link between homeowners’ existing mortgage rates and their hesitancy to sell. Homeowners with rates of 5.0% or higher exhibit a heightened inclination to contemplate selling their homes within the next three years, in contrast to those with rates below 5%.
While the rates do not need to revert entirely to 5%, the lowering of rates could prompt more homeowners to consider selling their homes and facilitating their move.
Rent Trends: A Closer Look
Following a period of record-breaking growth that saw annual rent price escalation peak at 16% in February 2022, the rental market is now transitioning back to conventional, long-term growth patterns, according to Zillow’s recent rental market report.
The report unveils that July’s 0.5% monthly rent growth surpassed pre-pandemic averages, yet the year-over-year growth of 3.6% exhibited a slightly cooler trend.
In the 50 largest metropolitan areas, notable monthly rent growth was observed in Buffalo (1.4%), Virginia Beach (0.8%), Washington, DC (0.8%), Birmingham (0.8%), and New York City (0.8%).
