June Market Report: 3 Ways to Close Amid High Rates and Low Inventory

With home shopping season in full swing, competition for some homes is at a fever pitch. In many markets, desirable homes are selling in less than a week. Nationally, more than a third are selling above list price — a smaller share than recent years, but more than pre-pandemic spring shopping seasons. But all of this often depends on a home’s starting price.

“We're seeing those bidding wars happening again, and it’s even more pronounced for the lower-price tier homes,” says Zillow Senior Economist Nicole Bachaud. “If I'm blocked by affordability and can no longer afford that mid-price home, I might be looking in that lower-price tier. What people are able to afford is being pushed down, and the more affordable homes are seeing more competition.”

This is amid historically low inventory, a debt-ceiling debate, and employment numbers helping to push mortgage rates back toward last fall’s highs. For many buyers and prospective sellers, weekly rate fluctuations can sway new mortgage payments by several hundred dollars, and qualification may seesaw in and out of reach. 

'So we have buyers saying, 'I can afford it. Now I can't afford it,'' says Bachaud. 'And that makes the challenges of low for-sale inventory levels even more acute.'

Something every home buyer needs right now

Given the level of competition for desirable homes, anyone hoping to compete in the market will need to bring secured financing as table stakes. “It’s important to communicate to buyer clients that they’ve got to be ready to move quickly,” says Bachaud. 'You're going to have a much stronger chance of staying afloat in these bidding war situations.'

Takeaway: Level-set with your clients. Let them know if they won’t have the negotiating power they did earlier in the year and that pre-approval may be simply a table stake. They may also need to be prepared to offer more earnest money, offer an appraisal gap guarantee, or consider other concessions.

High competition, low inventory can be sellers’ gain

Sellers facing life changes or looking to upsize can take solace in that, despite high and volatile mortgage rates, now may be a fine time to list. They can capitalize on the high likelihood that their home will sell, giving them some certainty and cash in hand as they embark on their next journey — wherein they can also refinance their new home at the appropriate time.

“The typical home value is up slightly from year-ago levels, and prices have been climbing at a rapid monthly pace since March, when competition over super-scarce inventory first heated up,' says Zillow Senior Economist Jeff Tucker. “Homeowners considering selling should know it's been a surprisingly hot spring selling season, and their listing would be as welcome as a cool oasis to buyers who feel like they've been wandering in a desert stricken by a drought of new listings all year.'

For sellers of higher-priced homes, which in many markets have seen year-over-year typical price declines and are experiencing less competition, it’s important to note that their home might just not sell as fast. 

“Even if homes down the block are selling really quickly, that might not necessarily be the case for the entire neighborhood,” says Bachaud. “That’s when an agent, who can craft a listing strategy that’s appropriate for the market and price tier, is especially crucial.” 

Takeaway: For mid-price sellers, maintain clear communication about listing and pricing strategy. For lower-priced home sellers on the fence, review the pros and cons of selling in this market.

New home sales up amid drop in existing sales

Where it’s available, new construction can offer welcome options in an inventory drought. Nationally, new home sales increased in April, up both from one month ago and one year ago.

“Home buyers are hungry for anything they can afford, and home builders are happy to meet them where they are,” says Bachaud. “The backlog of new construction homes started in the last year or so is making its way online and the majority of builders and projects are offering some incentives to offset affordability constraints.”

Takeaway: Explore new construction and builder incentives like rate buy-downs, cash at close, and property upgrades. 

Explore markets around the country with Zillow’s economics dashboards. Deep-dive into topics like affordability, competition, and housing supply and pressure.