Competition for homes and price appreciation tapered off faster than normal in July as high housing costs continued to stymie shoppers, according to recent data from Zillow. The Seattle-based real estate marketplace predicts that recent drops in mortgage rates should spur more competition heading into the fall.
"If this relief from mortgage rates continues, we should see more buyers restarting their hunt for a home," said Zillow Chief Economist Skylar Olsen. "But although rate lock among homeowners is easing, they probably won't be as motivated to jump back into the market and sell. With housing inventory still scarce, this improved affordability picture could reignite competition and sales as we head into the fall, or at least delay the usual post-summer cooldown."
Zillow reported that sellers gave up a marked advantage over buyers in July on the national scale. Homes are lingering on the market — even successful listings took almost a week longer to sell in July than last year. While that's still five days faster than the average pace of sales in the years before the pandemic, it's still a sign that buyers were much less eager to commit.
To win over cash-strapped buyers, home sellers again cut prices at record levels. 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.
Inventory continued to grow in July, and now stands nearly 25% above last year's levels, marking the eighth straight month the year-over-year inventory gap has widened, Zillow reported. Compared to pre-pandemic norms, the inventory shortfall shrank slightly and is now down 31.5%, the smallest deficit since October 2020.
Zillow anticipates cooling competition and a pricing slowdown could dissipate in August if lower mortgage rates hold. By the end of July, lower rates had brought the monthly price premium to buy a home below $200, which has shrunk from a $247 difference as recently as April 2024.
Lower rates aren't likely to encourage a comparable wave of current homeowners to sell, though. Zillow surveys show that 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 move in before school and the fall holidays begin.
Home value appreciation slowed to a refreshingly reasonable 2.8% year over year in July, but that could tick back up if the surge in demand outweighs an increase in supply, as expected.
