Buyers and sellers didn't jump back into the housing market as expected in February, but lower mortgage rates should encourage them in March, according to the latest market report from Zillow.
Mortgage rates fell by about a quarter of a point over the course of February and staggered further downward in March, reaching lows not seen since December. Mortgage rates have enough of an impact on monthly payments to provide significant cost savings for prospective buyers and could help entice some fence-sitting homeowners to list their properties, Zillow said.
Aside from costs, buyers are gaining a leg up in a few areas of the market. For one, they’ll see more options when they start shopping — 1.04 million homes were on the market last month, more than in any February since 2020, and 15 percent more than last year. That’s despite a nearly 5 percent slowdown from last year in the flow of new listings to the market.
“Affordability is still a massive challenge for those who have been waiting to buy a home, but the lower rates we’ve seen so far in March are taking the edge off,” Zillow Chief Economist Skylar Olsen said in a release. “Rate dips tend to energize buyers and sellers both; if they continue or hold, we should see more activity. Economic uncertainty is a counterbalance, one that will be felt in some areas of the country more than others. People tend to shelter in place when the future of their job or industry is uncertain.”
With more homes for sale, competition among buyers is slower, too, according to Zillow’s report. Listings are spending about 23 days on the market before a sale is pending. That’s six more days than last year and just four fewer than at this time pre-pandemic — closer to “normal” than at any time since 2020.
Slowing competition means slower growth in home values. Typical home values are up 2.1 percent year-over-year, the slowest growth seen in 18 months and the lowest for any February since 2012, according to the Zillow report.
Newly pending listings fell by nearly 8 percent compared with the prior year, but still stand about 10 percent above pre-pandemic norms, nationally. Sellers nationwide should expect to fetch premiums on their sale from now through the end of July, according to Zillow research.
Neither buyers nor sellers have a clear advantage in negotiations at the national level, according to Zillow’s market heat index. The last year that happened in February was 2019.
According to Zillow, the best markets for buyers are Miami, New Orleans, Jacksonville, Fla. Tampa, Fla., and Memphis, Tenn. The best markets for sellers are Buffalo, San Jose, Calif., San Francisco, Hartford, Conn., and Boston.