Summertime Cooling: 3 Agent Takeaways From the Latest Market Report

With interest rate hikes, inflation and low inventory all biting into buyer budgets, the market is seeing a shift toward seasonal normality. We spoke with Zillow Economist Nicole Bachaud about three market insights agents need as summer kicks in.

1. We’re in the beginning of a cooling market.

Takeaway for agents: “Rising rates and still-rising home values have put challenges in the market in terms of what people are able to afford and who can really participate,” said Bachaud. “Affordability has hit a 15-year low, so we're seeing a lot of buyer pullback.”

“Demand is softening and, as a result, we’ll come upon this inflection point, where things are going to start to slow down. We're still seeing an incredibly high share of homes selling above list price. Things are moving off the market really, really quickly, and so the market’s still going really fast. It's just going to start to cool off a little bit and come back to those normal seasonal levels.”

2. Study up on non-qualifying mortgage products.

Takeaway for agents: “Builders have been experiencing a drawback in demand from people who were once qualified for their mortgage and are now no longer qualified, given that the rising rates just push their debt-to-income ratio up too high,” Bachaud said. “In turn there's been this somewhat renewed interest in non-qualifying mortgages.”

“Those products don't follow the same income guidelines as a typical 30-year conventional mortgage, so you can have a higher debt-to-income ratio. We might be seeing pickups in these other loan products. ”

3. The cooldown won’t be like the Great Recession.

Takeaway for agents: Zillow surveyed around 100 economists in the field to get their opinions on the state of the market. Sixty percent of respondents said that we're not in a bubble.

“It's just that things are expensive, and a lot of people — especially consumers — confuse things being really, really expensive with being in a bubble. And so the expectation coming into this market is: ‘It’s gotten so expensive, so fast, that it has to get cheaper again.’ And that's, just realistically, not going to happen. Even if there is some sort of moderate price correction, it's not going to happen much on a national scale. It'll be within certain markets that maybe have been overambitious in price growth,” said Bachaud.

“In 2006 we had new construction at all-time highs. Now we're looking at a market where there's not enough homes to buy.”

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