Home values took an uncharacteristic step down in September, albeit a small one, according to the latest Zillow market report.
Data showed competition easing faster than normal this fall as buyers contend with the highest mortgage rates in more than 22 years.
“Mortgage rates approaching 8 percent are taking the wind out of the market’s sails, pushing monthly mortgage payments beyond many buyers’ budgets,” Jeff Tucker, Zillow senior economist, said in a release. “While attractive listings are still moving at a brisk clip, competition among buyers is fading quickly due to the shock of mortgage rates on top of normal autumn seasonality.”
U.S. home values took a short step backward from August to September, falling 0.1 percent. That’s not nearly as pronounced as the 0.8 percent monthly decline seen in September 2022, but a step backward is still unusual for this time of year, according to Zillow.
Between 2015 and 2019, monthly growth in September hovered between 0.1 percent and 0.4 percent.
The typical home value now stands at $350,091 nationally, up roughly 2 percent from this time last year. Of the 50 largest major metropolitan areas, 31 have home values higher than a year ago, according to Zillow.
The strongest annual home value appreciation is in relatively affordable markets, led by Hartford, Conn., (up 11.1 percent), Milwaukee (8.5 percent), Providence, R.I., (6.4 percent) and Virginia Beach, Va., (6.2 percent).
Largest declines are in pandemic-era hot spots Austin, Texas (-10 percent), Las Vegas (-4.3 percent), Phoenix (-4.2 percent) San Antonio (-2.5 percent) and New Orleans (-8.8 percent).
A distinct lack of new inventory has troubled the market for more than a year. But some homeowners may not be able to delay sales any longer, potentially lessening the effect of “rate lock” on their decision. Rate lock refers to the incentive for existing homeowners not to sell, because their existing mortgages have lower interest rates than today’s prevailing rates, Zillow added.
Despite high and rising mortgage rates, the flow of new options for buyers is coming slightly closer in line with seasonal norms. Compared with 2019, new listings were down nearly 18 percent this September, an improvement over deficits of 20 percent in August and 27 percent in July.
New listings fell by about 6 percent from August to September, but the step down is usually bigger — monthly declines averaged 13 percent in 2018 and 2019.
Zillow’s number of total listings for sale rose slightly in September, notching a 0.2 percent increase from August. But buyers still have far fewer choices than they normally would; inventory levels are about 10 percent lower than last year and 41 percent below that of 2019.
Home-buying conditions have continued to ease since late summer. Zillow data shows roughly 24 percent of listings in September receiving a price cut, a slight uptick from August and higher than 21 percent and 22 percent in 2018 and 2019, respectively.
August closed-sales data, the most recent available, showed fewer homes selling above their list price, too — about 38 percent versus 40 percent in July.