February Market Report: Is Rate Lock Fading?

It may be the dead of winter, but the lock-in effect is starting to thaw. Home equity is at a record high, and inventory continues to recover from pandemic-era shortfalls. Price cuts are up, and high rates are giving inventory breathing room to rebuild. 

Record equity means more sellers could be ready

Aggregate home equity in the U.S. was nearly $35 trillion in Q4 of last year. The previous peak for that figure, in 2005, was less than half that, at just above $14 trillion.

“All this equity means there are plenty of sellers out there who are right on the edge,” says Zillow Chief Economist Skylar Olsen. “Now is a great time to check in on those listings that went into hibernation for winter — cold seller leads could be ready to re-emerge for spring.”

Now is also a great time for those sellers to get busy prepping their homes for sale. “Get those landscapers scheduled as soon as weather permits, and in the meantime indoor improvements can add to your home value,” Olsen says. “Exterior paint and final curb-appeal projects can also happen when the weather warms up.”

Recent Zillow research shows 78% of sellers said life events, like landing a new job or a change in family size, influence their decision to sell. Sellers motivated by life events are less likely to find today’s higher mortgage rates to be a blocker. 

That same survey also found that just 54% of sellers then bought a home — down from 70% last year, suggesting mortgage rates are less of a consideration for an increasing share of sellers. 

New listings are rising the fastest year over year in higher-priced Western markets, led by Portland (up 48%), Seattle (40%), Denver (34%), and San Francisco (33%).  

Top 25 metros, by change in new listings year over year

Visit the Housing Market Snapshot to drill down further on your metro’s figures. 

Home price growth continues to slow, price cuts ramp up

Weakening rate lock is an opportunity for buyers too, and one way to measure this is in price cuts. 

“If I'm a buyer, I don't mind softer home price growth as an opportunity for affordability, to get my feet under me, to save for my down payment, and find price cuts” says Olsen. “Sellers are in such a good equity position that they’re often willing to make price cuts to close a deal. The general economy and financial markets are surprisingly strong. Homes are selling faster than before the pandemic.”

Metros with the highest share of listings that had a price cut

Metros with the lowest share of listings that had a price cut

Last month, nearly 23% of sellers cut their home’s list price, the highest share of any January since 2018. Buyers now have a strong chance to find deals on the margins. Zillow’s market heat index shows buyers had more power in negotiations than in any January over the past five years. For those who are ready, there’s still time to work on their credit and find a loan officer to get pre-approved (see more tips for buyers in the January market report). They can also use Zillow Home Loan’s BuyAbility tool, which helps them search for properties they can afford based on their financial situation and real-time mortgage rates.