Sellers lose their advantage, but lower rates may revive housing market competition
Home shoppers held up by high costs could restart their search in the shoulder season
- Zillow's market heat index shows the market moved into neutral, more balanced territory in July — the first time this year that it's been anything other than a sellers' market.
- Competition for homes eased — homes that sold went pending in 18 days, six more days than last year.
- An early August drop in mortgage rates should bring in more new buyers than sellers, reviving competition.
"If this relief from mortgage rates continues, we should see more buyers restarting their hunt for a home," said Zillow Chief Economist
Sellers lose the upper hand
Sellers gave up a marked advantage over buyers in July on the national scale, as the Zillow market heat index2 moved into neutral territory for the first time since December. This marks the first July the national market has been neutral since 2019; in each of the past two years, the market moved into neutral ground in October.
Among major markets,
Homes are lingering on the market — even successful listings took almost a week longer to sell in July than last year. While that's still five days faster than the average pace of sales in the years before the pandemic, it's still a sign that buyers were much less eager to commit.
Inventory accumulated further in July, and now stands nearly 25% above last year's levels, marking the eighth straight month the year-over-year inventory gap has widened. Compared to pre-pandemic norms, the inventory shortfall shrank a bit and is now down 31.5%, the smallest deficit since
In an effort to win over cash-strapped buyers, home sellers again cut prices at record levels. More than 26% of homes on Zillow received a price cut in July, the highest share for any July since at least 2018, when the dataset began.
What happens next?
This cooling competition and pricing slowdown could dissipate in August if lower mortgage rates hold.
By the end of July, lower rates brought the monthly price premium to buy a home, rather than rent a similar property, below
Of course, the cost disparity between renting and buying differs in every metro and even by neighborhood. But for those shoppers on the edge of affordability — and who have enough cash on hand for a down payment — the significant drop in rates may offer enough relief to entice a move. The effect of a rate cut on mortgage payments is more significant in expensive areas.
Lower rates aren't likely to encourage a comparable wave of current homeowners to sell, though. Zillow surveys show 80% of recent sellers were influenced by major life events, such as a change in their household size or working situation. New listings typically surge in spring and then taper off as homeowners aim to sell, buy another house, and be moved in before school and the fall holidays begin.
Home value appreciation slowed to a refreshingly reasonable 2.8% year over year in July, but that could tick back up if the surge in demand outweighs an increase in supply, as expected.
Metropolitan |
July Zillow |
ZHVI |
ZHVI |
Market |
Share |
Inventory |
Typical |
|
|
0.3 % |
46.6 % |
Neutral |
26.3 % |
-31.5 % |
|
|
|
0.9 % |
34.1 % |
Strong |
14.4 % |
-52.6 % |
|
|
|
0.3 % |
43.8 % |
Seller |
20.7 % |
-32.6 % |
|
|
|
0.7 % |
38.1 % |
Seller |
25.4 % |
-51.7 % |
|
|
|
-0.1 % |
46.9 % |
Neutral |
37.5 % |
-11.3 % |
|
|
|
0.1 % |
39.2 % |
Neutral |
28.8 % |
-17.3 % |
|
|
|
0.0 % |
31.1 % |
Strong |
23.2 % |
-44.6 % |
|
|
|
0.4 % |
45.5 % |
Seller |
22.9 % |
-49.8 % |
|
|
|
0.2 % |
62.4 % |
Buyer |
23.2 % |
-13.9 % |
|
|
|
0.1 % |
57.0 % |
Neutral |
31.9 % |
-16.8 % |
|
|
|
0.5 % |
44.4 % |
Strong |
19.6 % |
-42.1 % |
|
|
|
-0.3 % |
52.4 % |
Neutral |
34.3 % |
-23.1 % |
|
|
|
-0.2 % |
25.3 % |
Strong |
19.7 % |
-5.6 % |
|
|
|
0.3 % |
53.3 % |
Seller |
23.5 % |
-33.8 % |
|
|
|
0.4 % |
42.3 % |
Seller |
24.6 % |
-40.1 % |
|
|
|
-0.1 % |
45.0 % |
Seller |
28.7 % |
-26.2 % |
|
|
|
0.2 % |
28.3 % |
Strong |
26.5 % |
-37.4 % |
|
|
|
-0.2 % |
56.8 % |
Seller |
27.9 % |
-39.2 % |
|
|
|
-0.1 % |
61.6 % |
Buyer |
32.7 % |
29.0 % |
|
|
|
-0.1 % |
35.9 % |
Neutral |
38.2 % |
-3.8 % |
|
|
|
0.1 % |
31.9 % |
Seller |
25.7 % |
-50.7 % |
|
|
|
0.4 % |
42.2 % |
Strong |
23.0 % |
-48.6 % |
|
|
|
0.2 % |
55.0 % |
Buyer |
29.1 % |
25.3 % |
|
|
|
0.1 % |
59.8 % |
Neutral |
28.0 % |
-6.8 % |
|
|
|
-0.1 % |
34.7 % |
Neutral |
34.5 % |
10.8 % |
|
|
|
0.1 % |
32.8 % |
Seller |
30.5 % |
-24.9 % |
|
|
|
0.2 % |
35.1 % |
Seller |
28.5 % |
-34.7 % |
|
|
|
-0.2 % |
34.9 % |
Neutral |
28.7 % |
-43.9 % |
|
|
|
0.5 % |
49.7 % |
Seller |
29.1 % |
-42.1 % |
|
|
|
-0.4 % |
41.7 % |
Buyer |
32.6 % |
33.9 % |
|
|
|
0.6 % |
46.1 % |
Seller |
27.2 % |
-32.6 % |
|
|
|
0.3 % |
47.3 % |
Seller |
29.6 % |
-45.7 % |
|
|
|
0.4 % |
51.4 % |
Seller |
31.7 % |
-31.3 % |
|
|
|
0.3 % |
52.2 % |
Neutral |
33.1 % |
-24.3 % |
|
|
|
0.8 % |
49.8 % |
Strong |
23.5 % |
-58.6 % |
|
|
|
-0.4 % |
42.0 % |
Strong |
17.3 % |
-24.5 % |
|
|
|
0.1 % |
49.3 % |
Neutral |
36.8 % |
-15.1 % |
|
|
|
0.3 % |
42.4 % |
Seller |
24.4 % |
-51.2 % |
|
|
|
1.0 % |
55.1 % |
Strong |
19.7 % |
-61.0 % |
|
|
|
0.0 % |
52.5 % |
Buyer |
33.2 % |
4.6 % |
|
|
|
0.5 % |
44.9 % |
Seller |
16.4 % |
-32.6 % |
|
|
|
0.2 % |
43.8 % |
Neutral |
31.2 % |
-17.7 % |
|
|
|
0.0 % |
53.8 % |
Seller |
36.0 % |
-21.4 % |
|
|
|
-0.1 % |
46.9 % |
Buyer |
29.4 % |
1.6 % |
|
|
|
0.3 % |
48.5 % |
Strong |
25.4 % |
-45.9 % |
|
|
|
0.5 % |
38.7 % |
Neutral |
28.9 % |
-34.0 % |
|
|
|
0.4 % |
5.3 % |
Buyer |
26.4 % |
38.3 % |
|
|
|
-0.1 % |
46.4 % |
Seller |
33.3 % |
-20.1 % |
|
|
|
0.9 % |
59.7 % |
Strong |
16.5 % |
-67.2 % |
|
|
|
0.9 % |
55.2 % |
Strong |
19.7 % |
-43.7 % |
|
|
|
0.1 % |
38.2 % |
Neutral |
26.0 % |
-27.5 % |
|
|
*Table ordered by market size |
**According to Zillow's market heat index |
*** Mortgage payment, excluding taxes and insurance, for a house valued at the Zillow Home Value Index for that location, bought at the average mortgage rate for July (6.85%), using a 20% down payment. |
1 The Zillow® Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by |
2 The Zillow market heat index aims to capture the balance of for-sale demand and supply in a given market, or in this case, on a national scale. |
3 Pitting the monthly mortgage payment for a typical home, priced at the Zillow Home Value Index, using a 20% down payment, and weekly mortgage rate averages against the Zillow Observed Rent Index. |
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SOURCE Zillow