Lower mortgage rates and rising inventory in US real estate markets are giving home buyers a window of opportunity “at an unusual time of year,” according to the latest market report from Zillow (Nasdaq: Z and ZG).
Zillow noted in its latest real estate market update that affordability has “improved substantially for home buyers, and competition “among them could extend into the fall instead of fading away as is typical at this time of year.”
The report from Zillow further noted that mortgage rate declines have made buying a home “roughly affordable again at the national level (meaning monthly payments generally take less than one-third of median household income), assuming a buyer puts 20% down and before taxes and insurance are accounted for.”
Nationwide, the monthly payment on “a typical home purchase has fallen by more than $100 since a peak in May.”
As mentioned in the real estate market report from Zillow, that drop is said to be “more than $300 a month in the ultraexpensive San Francisco metro area.”
Beyond lower costs, a number of metrics are moving in buyers’ favor. The Zillow market heat index shifted from being “in favor of sellers into neutral territory in July.”
For the past two years, sellers held their edge “nationally until October.”
According to the real estate update from Zillow, homes are taking “longer to sell than in recent history, but shorter than in pre-pandemic times. Homes that sold in August took 20 days to go pending, two more than in July, but about six days faster than at this time of year before the pandemic. And while inventory growth has slowed, nearly 1.18 million homes are on the market, more than any month since September 2020.”
Lower rates could stall or slow a normal autumn cooldown, “because right now buyers are more likely to be motivated by lower rates than sellers are.”
Some signals are already pointing to “an altered trajectory in the housing market. The share of listings on Zillow with a price cut ticked down from July to August, reversing an upward trend of rising every month since March. Just under 26% of homes on the market had a price cut in August.”
According to the real estate market report from Zillow, that’s relatively high “for this time of year, but not a record, as seen in recent months.”
As stated in the update from Zilloq, opportunities for buyers:
- Lower rates mean improved affordability: Purchasing power is greater, and buying a house may now fit into buyers’ monthly budgets.
- Homes are taking longer to sell, giving buyers more time to decide and more leverage in negotiations.
- Inventory continues to slowly recover from a years-long shortfall, giving buyers more options.
As mentioned in the real estate market update, opportunities for sellers:
- Well-priced and -marketed homes are still selling relatively quickly, in 20 days, almost a week faster than at this time of year before the pandemic.
- Lower mortgage rates could raise buyer competition in the fall. The share of homes with a price cut dropped in August.
- One-third of homes that sold in July — the most recent data available — went for more than asking price.
- Seventy percent of sellers turn around and buy — the benefits to buyers given above apply to their next home.
