A warmer-than-normal housing market is showing signs of a typical late-summer seasonal cooldown, according to the latest Zillow market report.
Competition is still strong, with inventory hitting new lows for this time of year, but buyers have a bit more time to find and consider their big purchase.
“The housing market is returning to normal seasonal patterns, and that’s a positive sign for buyers who faced stiff competition this spring,” Zillow Senior Economist Nicole Bachaud said in a release. “As summer winds down and kids head back to school, home shopping gets put on the back burner. Traditionally, buyers who remain in the market gain a bit more bargaining power heading into the fall. This year, however, sellers are sticking to the sidelines, which means even fewer options and high prices.”
The typical U.S. home value climbed 0.9 percent from June to July — a steamy pace for this time of year, but a step back from 1.4 percent growth in the two preceding months. The nation’s typical home value is now $349,679,2 which is 1.4 percent higher than last July and 46 percent above pre-pandemic levels in February 2020, according to Zillow.
Austin, Texas, was the lone major market in which home values dipped from June to July, falling 0.5 percent. The slowest monthly home value growth was in San Antonio (0.2 percent), Denver (0.2 percent), Birmingham, Ala. (0.3 percent) and Memphis, Tenn. (0.3 percent).
Easing monthly appreciation is one sign that the normal seasonal pendulum of the market is swinging back in favor of buyers. Homes are also spending longer on the market before going under contract — 12 days in July compared to 11 in June and 10 in April and May. That’s still half as long as in 2019.
Zillow data also shows the volume of newly pending sales slowing down along seasonal trend lines, falling about 6.5 percent from June to July. Sales of existing homes, constrained by affordability challenges and a lack of homes on the market, are down about 15 percent year-over-year.
The number of listings with a price cut ticked up slightly from June as well. The share is right in line with pre-pandemic norms at about 22 percent.
Total active inventory in July was down 15 percent from last year and a tremendous 44 percent below July 2019 levels, according to Zillow.
“Buyers should not expect to see many more homes available for sale on Zillow at any time this year than they do now,” Bachaud said. “Inventory will decline from here if it follows pre-pandemic trends.”
Homeowners are stubbornly holding on to their houses. Zillow shows new listings of existing homes once again at a new seasonal low-water mark, as roughly 336,000 came to market in July. That’s 26 percent fewer than last July and 41 percent below pre-pandemic averages and is closer to what typically comes online in a frosty January.
New listings have been scarce for a year now, and the most likely cause — high mortgage rates — remains. A recent Zillow survey found some evidence that the gap between homeowners’ existing mortgage rates and today’s rates can help explain their reluctance to sell: Owners with a rate of 5percent or above were almost twice as likely to consider selling their homes in the next three years than those with a rate below 5 percent. That doesn’t mean rates need to return all the way to 5 percent, but that the lower they go, the more homeowners will be willing to entertain the idea of selling their homes to move.
Builders are helping bridge the inventory gap, ramping up new home sales now that it’s clear the supply of existing homes isn’t meeting demand. Builders are also getting more creative in order to offer buyers an affordable product, turning to smaller homes, more townhouses, and interest rate buydowns.