Home sellers are returning to the market, but they’re finding buyers hesitating, according to the latest Zillow market report.
New listings of houses outpaced sales in May, allowing buyer competition and price growth to cool — and further price relief is in the forecast.
“Rate lock’s hold seems to be loosening — homeowners who may have put off listing their homes are done waiting. But just as more choices sprang up for sale, buyers turned on cruise control,” Orphe Divounguy, Zillow senior economist, said in a release. “Inflation has hit younger households hardest, and stubbornly high rates have pushed a mortgage out of reach for many first-time buyers. That has cooled competition for houses. If these trends hold, we’re likely to see price growth flatten or tick down over the next year.”
New listings from sellers took a larger-than-average step up, rising 8 percent from April to May, and now stands 13 percent above last year’s extremely low level. The effects of “rate lock” — when owners hold onto their existing homes and low-rate mortgages — are weakening over time. A Zillow survey of recent sellers found a large majority (about 80 percent) were influenced by life events, such as getting married or having a child, and not necessarily by optimal financial conditions.
But buyers aren’t matching sellers’ enthusiasm; sales in May were 6 percent lower than last year. This helped partially restock the housing shelves, with the number of homes on the market rising 22 percent compared with last year’s near record-low level. Inventory is still 34 percent below pre-pandemic norms, but that’s the smallest deficit in more than three years.
New listings rose the most annually on the West Coast and coastal South, in San Diego, Seattle, Charlotte, N.C., Raleigh, N.C., and the San Francisco Bay Area. Compared with last year, total inventory accumulated the most in major Florida markets, where strong new construction has helped refill the coffers. Buyers saw more listings month-over-month in every major market except Miami.
As a result, competition among buyers eased in May, and home price appreciation cooled with it. Growth in typical home values slowed from 4.4 percent year-over-year in April to 3.9 percent in May — still a healthy, normal rate — while monthly appreciation ticked down from 1.2 percent in April to 0.8 percent in May. Home values are still up significantly — more than 45 percent — since before the pandemic, according to Zillow.
Prices have fallen year-over-year in New Orleans, Austin, Texas, and San Antonio, while appreciation is strongest in the Northeast and coastal California.
Zillow’s market heat index shows the nation is becoming a bit friendlier for buyers and is headed toward “neutral” territory, but sellers still hold a slight advantage. Buffalo, N.Y., Hartford, Conn., and San Jose, Calif., are the top markets for sellers among the 50 largest metro areas. New Orleans, Miami, Jacksonville, Fla., and Memphis, Tenn., are all tilted toward buyers, giving those in the market better leverage in negotiations.
Nationwide, nearly one-quarter of all homes for sale received a price cut in May, the highest share in the past six years for this time of year. There’s a good chance that buyers can purchase a lingering property for less than list price.