June Market Report: 3 Signs Affordability Could Be Improving

While we're still far from a balanced market, a few positive real estate indicators point to a potential thaw in the affordability freeze.

Nearly a quarter of homes for sale got a May price cut

23.9% of listings in May had a price cut, compared to 22.4% in April and 19.3% last May. The May percentage is the highest share in at least the last six years for this point in the selling season. 

“Sellers are cutting prices because they can afford to, as opposed to price declines coming from desperate sellers,” says Zillow Senior Economist Orphe Divounguy. “Many of those who choose to sell are sitting on near-record home equity. Many of these homeowners have 2-3% mortgage rates. And their home values ‌increased by 40, 50% during the pandemic… It's a price adjustment in the market that could result in more transactions.”

Buyers who are ready now are more likely to score a lingering property for less than list price. 

New listings and inventory up, sales down

New listings stepped up significantly in May, rising 8% month over month (a bit more than pre-pandemic averages) and 13% above last year’s extremely low pace. The grip of rate lock appears to be loosening over time. 

But buyers in many markets aren’t matching sellers’ uptick in activity. Sales in May were lower than last year’s already-low volume. This helped partially restock inventory, which rose 22% compared to last year’s level. That’s still 34% below pre-pandemic levels, but it’s the smallest deficit in more than three years. 

“Just as more sellers listed their home for sale, buyers in many markets just seemed to hit cruise control,” Divounguy says. “Thankfully, we’re also seeing positive macroeconomic indicators that may incentivize them. Just like sellers, buyers often have an ultimate ‘why’ that’s motivating them to move.”

80% of recent sellers were influenced by life events

A Zillow survey of recent sellers found about 80% were influenced by life milestones like getting married or having a child — not necessarily by financial conditions alone. 

Existing homes are refilling the market, in part, because those life events increasingly motivate sellers that had been sitting on the sidelines. 

“The upshot here is that buyer agents can consider negotiating more aggressively,” Divounguy says.

Missed last month’s market report? Catch up here.