Home shoppers got some welcome breathing room in May as home sales ticked up and competition eased, according to Zillow’s latest market report. A combination of slightly lower mortgage rates, a surge in inventory, and record price cuts contributed to the modest rebound in sales after a slower-than-expected April.
“Home buyers today have a few factors in their favor: Rates are lower than last year, they have more homes to choose from, and sellers are cutting prices at record rates,” said Kara Ng, senior economist at Zillow. “But they still face major obstacles, particularly saving up enough for a down payment and finding a home within their budget. Many families looking to upsize are realizing it's cheaper to rent a starter home than to buy one.”
Newly pending sales rose 3.5% month over month in May and edged 0.9% above levels from a year earlier. Inventory also jumped, reaching 1.3 million listings — the highest number since July 2020 — and up nearly 20% year over year. That boost has given buyers more options and bargaining power.
While the market hasn’t fully tipped in favor of buyers, competition has cooled. May marked the least competitive conditions for the month since Zillow began tracking in 2018, with homes spending a median of 17 days on market — up four days from last year.
Price cuts are more common too. Sellers slashed asking prices on roughly 26% of listings nationwide, a record high for May. Zillow’s market heat index now signals a broadly balanced market, with less urgency for buyers and more room to negotiate.
Still, affordability pressures continue to shape demand. In 22 of the 50 largest metro areas, home values have declined year over year. And though sales are improving, they remain below historic averages.
Meanwhile, the rent-versus-buy dynamic has shifted dramatically. “Renting a starter home makes financial sense — at least in the short term — for much of the nation,” Ng said. On average, renting a single-family home costs about $100 less per month than buying, even after a 10% down payment. Six years ago, buying was $373 cheaper.
Zillow’s latest rental report indicates that single-family rent growth — once fueled by pandemic-era demand — is cooling. Combined with falling mortgage costs, the rent-vs-buy gap has narrowed by half over the past year. That trend may continue, as Zillow expects rents to grow faster than home values in 2025.
The market’s movement toward balance is promising, but far from a full recovery. Tariff-related market jitters and spring stock market losses likely held back April’s sales, which fell 2.5% year over year. As the S&P 500 recovered in May and consumer confidence rebounded, sales improved — but affordability remains the linchpin for sustained growth.
