After months of watching the cost of a new mortgage rise higher and higher, homebuyers finally saw some relief in November, according to new data from Zillow.
A combination of declining home values and lower mortgage rates brought the monthly mortgage payment on a typical U.S. home down by about $100 in November. Still, monthly mortgage costs are up $720, or 66.1 percent, over the past year.
Home values are easing down as affordability challenges vex potential buyers. The typical home is worth $357,733, 0.2 percent less than in October and down 0.5 percent from a peak in June, according to Zillow.
By the same token, mortgage rates falling in November brought monthly costs down for the first time since July and for only the second time in the past 19 months. While it’s unlikely affordability will significantly improve anytime soon, November’s news is a positive sign that affordability may at least stabilize in 2023, according to Zillow.
“The housing market entered a deep freeze this November as buyers paused their purchasing plans, likely ‘til after New Year’s in many cases,” said Zillow Senior Economist Jeff Tucker in a release. “The two big questions are whether mortgage rates will continue to decline, and whether that will be enough to bring buyers back in time for the spring selling season. In the meantime, those on the prowl for a house will benefit from motivated sellers, unusual bargains and a welcome lack of competition.”
While national home value declines from peak levels have been minimal, some markets have seen significant changes. According to Zillow, the largest declines from peak are in the most expensive markets: San Jose, Calif. (-10.6 percent) and San Francisco (-9.5 percent) — as well as Western markets that saw the largest pandemic-era appreciation: Austin, Texas, (-10.4 percent), Phoenix (-8.1 percent) and Las Vegas (-8 percent).
Of the 14 major markets in which home values are still growing, almost all are less expensive than the national average and are located in the inland South or Midwest and Great Lakes regions. Relative affordability in the latter two areas is one reason Zillow economists expect them to host the healthiest housing markets in 2023.
But the slight drop in mortgage costs isn’t reinvigorating the market yet. Between the annual winter doldrums and serious affordability concerns, activity in the market was as slow as it’s been since the outbreak of the pandemic, Zillow reported; both sales and new listings of existing homes continued to fall in November.
The number of listings that went pending in November fell by 16.5 percent from October and was down 38 percent compared to last November. New listings were also below 2021, sitting 25.4 percent lower than last year.
Total inventory is up 7 percent year-over-year, by far the largest increase since at least the start of 2018, according to Zillow. Listings’ median time on market before going pending is now 22 days, twice as long as last November and a far cry from the trough of six days in March and April.