Sellers lose their advantage, but lower rates may revive market competition (July 2024 Market Report)
Competition for homes and price appreciation tapered off faster than normal in July as high housing costs continued to stymie shoppers. But recent drops in mortgage rates should spur more competition as we head into fall.
Sellers lose the upper hand
Sellers gave up an advantage over buyers in July on the national scale, as the Zillow market heat index 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.
One sign of decreased competition is homes taking longer to sell. Homes that went pending in July typically did so after 18 days on the market. That’s almost a week longer than last July.
Inventory continues to accumulate, and now stands nearly 25% above last year’s levels, marking the eighth straight month the year-over-year inventory gap has widened. The inventory shortfall compared to pre-pandemic norms shrank a bit and is now down 31.5%, the smallest deficit since October 2020.
More options for buyers means less intense competition for each home. That’s evident in the growing share of home sellers cutting their prices. 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?
If this relief from mortgage rates holds, we should see more buyers re-starting their hunt for a home. By the end of July, lower rates made a new homeowner’s mortgage payment on the typical home just under $200 more than it would take to rent the same kind of property. That’s shrunk from a $247 gap as recently as April. Now, lower rates in August are making buying even more attractive by comparison.
Lower rates aren’t likely to encourage a comparable wave of current homeowners to sell. 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.
More demand without a corresponding increase in supply would likely mean competition ramping back up, or at least a delay in the usual post-summer cooldown.
Home values
- The typical U.S. home is worth $362,156.
- The typical monthly mortgage payment, assuming 20% down, is $1,900. That is up 3.4% from last year and has increased by 111.1% since pre-pandemic.
- Home values climbed month over month in 34 of the 50 largest metro areas in July. Gains were biggest in Providence (1%), New York (0.9%), Hartford (0.9%), Buffalo (0.9%) and Cleveland (0.8%).
- Home values fell, on a monthly basis, in 13 major metro areas in July. The largest monthly drops were in San Jose (-0.4%), Austin (-0.4%), Phoenix (-0.3%), San Francisco (-0.2%) and Pittsburgh (-0.2%).
- Home values are up from year-ago levels in 44 of the 50 largest metro areas. Annual price gains are highest in San Jose (10.6%), Hartford (9.1%), San Diego (7.8%), Providence (7.4%) and New York (6.8%).
- Home values are down from year-ago levels in four major metro areas: New Orleans (-5.3%), Austin (-4.6%), San Antonio (-2.9%) and Birmingham (-0.7%).
New listings & total inventory
- New listings decreased 6.3% month over month in July.
- New listings increased 6% compared to last year.
- New listings are 24.7% lower than pre-pandemic levels.
- Total inventory (the number of listings active at any time during the month) increased 1.3% month over month in July.
- There were 24.6% more listings active in July compared to last year.
- Inventory levels are 31.5% lower than pre-pandemic levels.
Price cuts & share sold above list
- 26.2% of listings in July had a price cut. That is up 1.8 percentage points (ppts) month over month.
- There are 4.5 ppts more listings with a price cut compared to last year.
- 35.4% of homes sold above their list price last month. That is up 0.2 ppts month over month.
- 5 ppts fewer homes sold above their list price compared to last year.
Newly pending listings
- Newly pending listings decreased by 1.2% in July from the prior month.
- Newly pending listings increased by 1% from last year.
- Median days to pending, the typical time from the initial list date to moving to pending status for homes that went under contract, was at 18 days in July. That is up three days from the month before and up six days from last year.
Market heat index
- Zillow’s market heat index shows the nation is currently a neutral market.
- The strongest sellers markets in the country are Buffalo, Hartford, San Jose, Boston and San Francisco.
- The strongest buyers markets in the country are New Orleans, Miami, Austin, Memphis and Jacksonville.
Rents
- Asking rents increased by 0.4% month over month in July. The pre-pandemic average rent growth for this time of year is 0.6%.
- Rents are now up 3.4% from last year.
- Rents fell, on a monthly basis, in one major metro area: Austin (-0.2%).
- Rents are up from year-ago levels in 48 of the 50 largest metro areas. Annual rent increases are highest in Hartford (7.9%), Cleveland (7.3%), Providence (6.7%), Louisville (6.6%) and Richmond (6%).
