Despite mortgage rates reaching a 23-year peak and the usual seasonal slowdown, buyer demand remains robust due to low inventory levels, as revealed in Zillow’s recent market report. The report highlights that while inventory stocks are slowly rebounding and price appreciation is decelerating, competition for attractive listings remains fierce, leading to quick sales.
The mortgage rate, a pivotal figure for prospective buyers and sellers, surged throughout October, concluding the month near the 8% mark. This increase resulted in monthly payments for a typical U.S. home climbing by over 4% from September to October. As of now, at $1,991, monthly payments have risen almost 10% since last October, nearly doubling in two years.
According to the Zillow Home Value Index, the average U.S. home value stands at $347,972, marking a 2.3% increase from last year. However, a 0.3% drop in values occurred in October, slightly more than the 0.1% dip from August to September, indicating a marginally faster deceleration than pre-pandemic norms.
In 40 of the top 50 markets, home values fell in October, with the most significant declines observed in Austin (-1.5%), Minneapolis (-1%), and New Orleans (-1%). Conversely, the largest monthly growth was seen in Miami (0.5%), San Jose (0.4%), and San Diego (0.2%).
Inventory levels, while still depleted, are showing signs of recovery. New listings in October decreased almost 5% from September, but this figure is still the lowest for any October on Zillow’s record (since 2018). Despite these low levels, the long-standing deficit in new listings is gradually reducing as sellers come to terms with persistently high rates.
Although there were 39% fewer homes for sale in October compared to pre-pandemic norms, this figure is an improvement from the 46% deficit recorded in May. Total inventory increased by 2.6% nationally from September to October, due to fewer sales and a smaller-than-expected drop in new listings in September.
Rising rates and recovering inventory led to a decrease in bidding wars and an increase in sellers reducing list prices. In October, 25.2% of sellers cut their list price, up from 23.9% in September. However, attractive listings continue to sell quickly, typically within 16 days – one day longer than in September, but two days faster than last year, and two weeks faster than in 2019.
In summary, despite rising mortgage rates and the seasonal cooldown, buyer demand remains surprisingly strong. As inventory levels continue to recover, the competition over attractive listings has them selling fast, indicating a robust real estate market.
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