Competition among buyers over a limited number of available houses has made this home shopping season unusually hot, according to the latest market report from Zillow.
Meanwhile, high mortgage rates are continuing to deter homeowners from listing, pushing inventory to record lows.
“Many homeowners are still opting not to sell and give up historically low mortgage rates. But those who do have been rewarded with bidding wars as buyers compete for limited options,” Zillow Senior Economist Jeff Tucker said in a release. “Spring is traditionally the hottest time of year in the housing market, and 2023 has been no exception. Time will tell if seasonal price slowdowns arrive on time this year, later in summer.”
Zillow data shows typical U.S. home values growing by 1.4 percent from April to May, the strongest monthly appreciation since last June. That’s a few degrees cooler than the previous two springs, but hotter than in 2018 or 2019. The typical home value is $346,856 — up 0.9 percent over last May and up 3.4 percent from a recent low in January.
A new loan on a home priced at the typical value in the U.S. would feature monthly mortgage payments just shy of $1,800. That monthly payment is 22 percent higher than last year, double that of May 2019, and the second highest on record after October 2022, according to Zillow.
Affordability is still the key driver of demand, and that’s reflected in the markets that are appreciating fastest, Zillow stated. The largest monthly home value gains are in the Midwest — home to six of the seven metros with the biggest gains in May. Columbus, Ohio, led the way (2.2 percent monthly gain), followed closely by Cincinnati, Detroit, Richmond, Va., and Milwaukee.
Price growth also sprang back in West Coast tech hubs after prices fell significantly there late in 2022. Home values rose faster than the national average for the second straight month in San Jose, Calif. (1.9 percent), Seattle (1.7 percent) and San Francisco (1.4 percent).
A shortage of new listings has dogged the housing market for almost a year. The flow of new listings was down 23 percent year-over-year in May — a milder drop than in April, but nearly equal to that of March, according to Zillow.
The chief driver is still higher mortgage rates, which make a new loan unattractive when the majority of mortgaged homes are financed for less than 4 percent. Even without intentions to buy again, anyone with a mortgage at a rate under 4 percent might be loath to sell when there’s a possibility to rent out the home for more than their carrying costs.
The lack of new listings, paired with resolute demand from buyers, has driven prices up and total inventory down to record lows for this time of year. The number of homes for sale on Zillow in May was 3.1 percent lower than last year — the former low-water mark — and a massive 46 percent below that of May 2019.