Buyers find a bit of relief as prices and rates ease (November 2023 Market Report)
What buyers should know about the market right now:
- Lower mortgage rates and cooling home values made a home purchase slightly more affordable in November.
- Price cuts are more common than normal – chances are good that prices are negotiable.
- While choices are still scarce compared to pre-pandemic norms, the inventory deficit is shrinking.
What potential sellers should keep in mind:
- Competition for attractive listings is still hotter than normal in this low-inventory environment – homes are selling two weeks faster than pre-pandemic.
- Mortgage rates are slowly easing down, but buyers are still constrained by costs. Dropping your price to meet buyers where they’re at is a common strategy – more so than typical at this time of year.
Home shoppers and sellers braving the wind and rain late in the year are getting some early holiday surprises. Monthly costs for a new mortgage are falling, inventory is trending closer to normal, and price cuts are uncharacteristically common.
The monthly decline in costs was driven mostly by falling mortgage rates. But rates still higher than 7% continue to hamper demand and help push home values down. Sellers are responding to affordability challenges as well by cutting list prices.
Home shoppers have dealt with a low flow of new listings for nearly two years, but some sellers are finally deciding to return to the market. New listings bottomed out at almost 35% below pre-pandemic norms in April, but positive momentum over the past few months has cut the shortfall to just 14%.
Home values, mortgage costs tick down
Year-over-year growth in the Zillow Home Value Index (ZHVI) continues to climb, though that hides more recent home price trends. With mortgage rates still above 7% for prime borrowers in November, ZHVI’s monthly growth rate went more negative than is typical in November.
- The typical home in the U.S. is worth $347,415.
- The typical monthly mortgage payment, assuming 20% down, is $1,925. That is up 9% from last year and has increased by 120% since pre-pandemic.
- Home values rose month-over-month in just two of the 50 largest U.S. metro areas: Miami (0.3%) and Las Vegas (0.1%).
- The largest monthly drops were in New Orleans (-1.6%), Austin (-1.3%), San Antonio (-1%), Minneapolis (-1%) and San Francisco (-0.8%).
- Home values are higher than last year in 37 of the 50 largest metro areas. Annual appreciation is strongest in Hartford (11.3%), Milwaukee (8.5%), San Diego (7.6%), Providence (7.4%) and Boston (7.2%).
- The largest annual home value drops were in New Orleans (-8.9%), Austin (-8.2%), San Antonio (-3%), Jacksonville (-1.5%) and Memphis (-0.9%).
Inventory continues slow climb out of pandemic hole
New listings showed encouraging improvement, now only 14% down from pre-pandemic norms for this time of year. Further improvement in mortgage rates, and possibly a mindset shift for sellers who are no longer expecting rates to fall in the near future, encouraged more listings.
- New listings are 14.1% lower than pre-pandemic levels, compared to a 34.8% shortfall in April.
- New listings decreased by 20.5% month-over-month in November.
- New listings in November were 3.1% higher than last year, despite mortgage rates being higher.
- Total inventory (the number of listings active at any time during the month) in November decreased by 5.3% from October, and were 2% lower than last year.
- Inventory levels were 37.2% lower than pre-pandemic levels for this time of year.
Price cuts still abnormally common as sellers respond to high rates
After an unseasonable increase in October to 25%, the share of listings with a price cut in November at 22.6% is even more unseasonably high. Agents are likely updating their pricing strategies with pressure from higher mortgage rates weighing heavily on buyers.
- 22.6% of listings in November had a price cut. That is down 2.5 percentage points month over month.
- Price cuts fell 1.6 percentage points from last year.
Sales are down, but homes that sell are moving quickly
As mortgage rates returned to near to where they sat last year at the end of 2022, so too has the number of days it takes to go pending. Homes sold in November went under contract in only 21 days, faster than November 2022 by just a day, but more than two weeks faster than pre-pandemic norms for this time of year. Even with buyers pulling back in response to high mortgage rates, very low inventory is keeping competitive pressure fairly high.
- Newly pending sales fell by 15.9% in November from the prior month, and were 4.6% lower than last year.
- Median days to pending was 21 days in November, five days slower than last month but a day faster than last year.
Rents fell, in line with seasonal norms
Asking rents across the U.S. ticked down in November at roughly the level we expect to see this time of year based on historic norms. Rent growth for single-family homes has been stronger than for multi-family homes, a trend that’s likely to continue according to Zillow’s 2024 housing predictions.
- The typical U.S. rent is $1,982 according to the Zillow Observed Rent Index (ZORI).
- U.S. rents decreased by 0.2% month over month in November. The pre-pandemic average change for this time of year is -0.1%.
- Rents are now up 3.3% from last year.
- Rent growth has been stronger for single-family homes (+4.8% year over year) than multi-family homes (+2.5% year over year).
- Rents fell, on a monthly basis, in 32 major metro areas. The largest monthly drops are in Raleigh (-0.9%), San Jose (-0.8%), San Francisco (-0.8%), San Diego (-0.8%) and Austin (-0.7%).
- Rents are up from year-ago levels in 47 of the 50 largest metro areas. Annual rent increases are highest in Providence (7.3%), Hartford (7.2%), Cincinnati (6.4%), Columbus (5.8%) and St. Louis (5.7%).
Read more about the rental market in Zillow’s November 2023 Rental Market Report.
