SEATTLE, WA — The U.S. housing market is showing signs of shifting in favor of buyers, according to the latest Zillow report. Competition among homebuyers has cooled as rising mortgage rates, seasonal slowdowns, and inventory recoveries contribute to an evolving market dynamic.
“Competition is softening for buyers as mortgage rates inch back toward 7%, aligning with the typical winter slowdown,” said Skylar Olsen, Zillow’s chief economist. “Inventory levels are improving, and price reductions remain common, offering persistent buyers opportunities to negotiate.”
Changing Market Conditions
Zillow’s market heat index now identifies more regions veering toward a buyers market, especially in Southern states like Texas, Florida, and Louisiana. Buyers are finding increasing leverage in cities like Pittsburgh and Louisville, which joined eleven other major metro areas where negotiating power has shifted in their favor. These include Indianapolis, Nashville, and Atlanta, which became buyers markets in September.
One of the driving factors behind this shift is an uptick in inventory recovery from the extreme shortages seen during the pandemic. Among the 13 major buyers markets, inventory has rebounded more substantially compared to most other U.S. cities.
Several Southern cities, including Austin, Dallas, and Tampa, have seen the largest monthly declines in home values. Listings in these areas are staying on the market longer, reflecting reduced competition.
Inventory and New Construction
Nationally, inventory remains 28% below pre-pandemic seasonal norms, but this is the smallest shortfall since 2020, signaling progress. The inventory gap peaked in March 2024 with a 36% deficit, but continued new construction in certain regions has helped markets regain balance. Areas where builders have kept pace with demand are experiencing slower price growth and more stability.
Mortgage Rates Tightening Affordability
After four months of declining mortgage rates, October brought an increase, with rates nearing 7%. This bump drove mortgage payments on a typical home up by 2.8% compared to September, reversing some of the affordability gains seen earlier in the year. Still, payments remain more than $100 lower per month than May’s peak and are $179 less than in October 2023.
Buyers willing to remain active in the market during its seasonal lull may find opportunities in markets experiencing improved inventory or declining competition. With inflationary pressures and rate changes continuing to influence affordability, the long-term trajectory of the market remains dynamic.
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