The housing market is as competitive as ever, according to a recent Zillow real estate market report.
Buyer demand has been strong enough to keep the market moving at a record pace, even after a massive spike in mortgage rates.
Year-over-year home value growth set a record for the 13th consecutive month in April. The typical home is worth $344,141, up 20.9 percent year-over-year. That record pace of growth comes despite soaring mortgage rates. The monthly mortgage payment on the typical home was 52.5 percent higher than a year ago, assuming a 30-year mortgage with a 20 percent down payment.
“We do expect the market to begin rebalancing this spring as rising costs keep enough would-be buyers on the sidelines for inventory to begin catching up with demand, but we have not yet reached that point,” Zillow Economist Nicole Bachaud said in a release. “Nearly half of homes are selling above their list price, and April sales happened as fast as we’ve ever recorded. It may very well be that fewer people are trying to buy, but with bidding wars continuing to drive up prices on limited inventory, those in the market today likely won’t feel much relief.”
Rising costs have not yet eased competition. Homes that sold in April typically went pending after only seven days, tying a monthly record set last May and June. To put that market speed into perspective, in April 2019, the typical home sat on the market for 24 days before an offer was accepted.
Nearly half (48 percent) of homes that were purchased in March sold for more than the asking price, indicating the buyer expected multiple bidders. That’s up from 37.5 percent in March 2021. More than three-quarters of homes are selling above list price in the country’s most competitive markets: San Francisco (80.4 percent), Seattle (77.3 percent) and San Jose, Calif. (76.1 percent).
Zillow said signs are starting to emerge that a more balanced market is coming. The share of listings with a price cut hit 9.1 percent, higher than 8.6 percent in March and 7.8 percent last April. That may be a sign that sellers cannot be quite as ambitious in their pricing strategy as they could have been in recent months, according to Zillow.
Inventory continues to rise as well, up 5.5 percent from March. More inventory is both the consequence and the cause of a more balanced housing market, according to Zillow. It limits the number of buyers bidding on each home as there are more to choose from, and it prompts sellers to price their home competitively.
Zillow’s home value forecast calls for 11.6 percent growth through April 2023, down from a year-ahead forecast of 14.9 percent made in March. Zillow’s forecast for existing home sales has been lowered as well, now predicting 5.73 million sales in 2022. That would mark a 6.4 percent decrease from 2021. Spiking mortgage rates, inventory gains, and lower-than-expected pending home sales and mortgage application data drove the downward revision.
The lowered projections would still represent a very strong housing market in the coming year, according to Zillow. While 5.73 million existing home sales would be a decrease from a remarkably strong 2021, that would mark the second-best calendar year total since 2006.