Zillow® report says inventory is accumulating, rising 22% over last year and reducing the pandemic-era deficit in the real estate market.
According to the most recent Zillow® market report by senior economist Orphe Divounguy, more sellers are returning to the housing market while buyers are cautious. This decreases buyer competition and price growth, which is expected to result in further price moderation in the upcoming year.
Divounguy explains that the influence of historically low mortgage rates appears to be diminishing. Homeowners hesitant to sell are now more inclined to list their properties. Nevertheless, with a growing number of options for buyers, their sense of urgency appears to be diminishing.
Inventory Levels Rise
The report emphasizes a notable surge in new listings, with an 8% rise from April to May surpassing sales.
There has been a 13% increase in available homes compared to the previous year, which is encouraging for potential buyers.
According to Zillow's survey of recent sellers, life events like marriage or starting a family were the main reasons for selling rather than aiming to take advantage of market conditions [1].
Buyers Not Matching Seller Enthusiasm
Even with more listings coming in, there is still low buyer activity.
Sales decreased by 6% in May compared to the previous year. This decrease has led to an increase in housing market inventory, now 22% higher than the extremely low levels of 2023.
Although inventory is still 34% below pre-pandemic levels, it is the most minor shortfall in over three years.
Market Variations
The report highlights these regional differences:
The West Coast and coastal South, which include cities like San Diego, Seattle, Charlotte, Raleigh, and the San Francisco Bay Area, experienced the most significant year-over-year increase in new listings.
Major Florida markets, driven by strong new construction, saw the most significant year-over-year growth in total inventory. With the exception of Miami, buyers in all primary markets found a wider range of listings compared to the previous month.
Cooling Competition and Appreciation
In May, there was a decrease in buyer competition, as highlighted in the report. This resulted in a slowdown in the appreciation of home prices.
The year-over-year growth rate for average home values decreased from 4.4% in April to 3.9% in May, which is still considered a solid pace.
Monthly appreciation dropped from 1.2% in April to 0.8% in May.
Since the onset of the pandemic, home values have increased substantially, with a total appreciation exceeding 45%.
Price Trends
Prices dropped in specific markets, such as New Orleans, Austin, and San Antonio, compared to the previous year.
The Northeast and coastal California continue to show the highest appreciation rates.
Forecast for Down Payment Relief
Renters who are struggling to save for a down payment on a home may soon find some relief.
According to Zillow's forecast, a modest uptick of 0.4% in home values is expected in the real estate market for the upcoming year, 2024. This slight increase could offer renters a window of opportunity to transition from renting to owning a property.
The forecast also suggests a subsequent decrease of 1.4% in home values by May 2025.
This fluctuation in housing market dynamics could present prospective homebuyers with challenges and opportunities. As such, renters who aspire to become homeowners may need to carefully navigate these predicted changes to make informed decisions about their home-buying journey.
Source:
[1] The Zillow® Real Estate Market Report is a monthly national and local real estate market overview. Zillow Research compiles the reports.
[2] Tracked by Zillow's Sales Count NowCast.
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(C) 2024 Jeff Sorg