As the housing market enters what is typically its off-season, lower mortgage rates and an uptick in available inventory are giving homebuyers an unexpected window of opportunity.
According to the latest market report from Zillow, improved affordability is keeping the competition among buyers alive well into the fall, a time when the real estate market usually slows down.
“Late summer may be an opportunity for buyers who have been waiting in the wings for a monthly mortgage payment they can qualify for,” Skylar Olsen, Zillow’s chief economist, said in a release. “Buyers have more options to choose from for two reasons. For one, it’s easier to qualify for more of the homes on the market now that mortgage rates are a bit lower. Beyond that, more inventory is becoming available — enough to improve buyer negotiating power.”
Improved affordability fuels fall demand
One of the key drivers behind this extended buying season is a reduction in mortgage rates, making homeownership more affordable nationwide. Monthly mortgage payments have dropped by more than $100 since peaking in May. For buyers in ultra-expensive markets like San Francisco, the savings are even more significant, with typical monthly payments down by more than $300, according to Zillow.
This shift has brought homebuying closer to affordability at the national level, assuming a 20 percent down payment and excluding taxes and insurance.
“Mortgage rate declines have made buying a home roughly affordable again at the national level,” Olsen noted, adding that buyers can now qualify for homes that had previously been out of reach due to higher rates.
Beyond lower costs, other indicators are also beginning to favor buyers. Zillow’s market heat index, which had been solidly in favor of sellers for the past two years, entered neutral territory in July. This marks the earliest shift away from a seller’s market since the pandemic began, signaling that buyers are gaining more negotiating power.
Inventory rises, but hot markets stay competitive
More homes are hitting the market, with 1.18 million listings available nationwide — the highest inventory levels since September 2020. However, despite the growing number of listings, Zillow said competition remains stiff for attractive properties, especially in hot markets. More than one-third of homes are still selling for over asking price.
Homes that sold in August took an average of 20 days to go under contract — two days longer than in July, but still six days faster than at this time of year before the pandemic.
This trend, combined with the increase in available homes, suggests that buyers are finding more options, but sellers in competitive markets are still able to command premium prices.
"Attractive properties in hot markets are still selling quickly, but some metros — or neighborhoods within them — have flipped further in favor of buyers," Olsen said.
Price cuts and slower sales indicate a cooling market
Another signal the market is cooling slightly is the number of price cuts seen on listings. Just under 26 percent of homes on the market had a price reduction in August, a decrease from Zillow’s July figure. This reverses a months-long trend of increasing price cuts, which began in March. Though still relatively high for this time of year, it’s a sign that some sellers are responding to shifting buyer demand.
“Homes are taking longer to sell, and sellers are finding that they need to make concessions to close deals,” Olsen explained.
However, the cooling market may not be as dramatic as it has been in previous years. Lower mortgage rates could stall or slow the typical autumn cooldown.
“Buyers are more likely to be motivated by lower rates than sellers are, which could alter the usual trajectory of the housing market as we move into the fall,” Olsen added.
Outlook for the months ahead
While the traditional fall slowdown is expected to take hold, current market dynamics suggest any cooling may be tempered by the influx of buyers taking advantage of lower mortgage rates. As more inventory becomes available, and with mortgage payments now more manageable for many potential homeowners, it seems the 2024 housing market may break from its usual seasonal patterns.
For those in the market, this means the offseason could be the perfect time to find a home. Buyers who’ve been priced out of the market earlier this year are now able to revisit their options, while sellers may need to adjust their strategies to account for these changing dynamics.
As Olsen puts it, “This fall presents a rare chance for both buyers and sellers to find a deal that works for them, and we expect this unseasonal activity to continue for a while longer.”