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Home Prices Rise As Buyers Outnumber Sellers: Zillow

Jun 12, 2023
rising home prices

Monthly home value growth of 1.4% is the highest since June 2022.

KEY TAKEAWAYS
  • Sales rose nearly 10% from April to May.
  • Inventory reached a record low for May as high mortgage rates deter sellers.
  • The typical home value is $346,856, up 0.9% over last May and up 3.4% from a recent low in January. 

As high mortgage rates continue to deter homeowners from listing, competition among buyers over the record-low number of houses for sale has made this home-shopping season unusually hot, Zillow said Monday

"Many homeowners are still opting not to sell and give up historically low mortgage rates,” said Zillow senior economist Jeff Tucker. “But those who do have been rewarded with bidding wars as buyers compete for limited options.”

Tucker said spring is traditionally the hottest time of year in the housing market, “and 2023 has been no exception. Time will tell if seasonal price slowdowns arrive on time this year, later in summer."

Typical U.S. home values grew 1.4% from April to May, the strongest monthly appreciation since June 2022, Zillow said, adding that's a little cooler than the previous two springs, but hotter than in 2018 or 2019. 

The typical home value is $346,856, up 0.9% over last May and up 3.4% from a recent low in January. 

A new loan on a home priced at the typical value in the U.S. would feature monthly mortgage payments just shy of $1,800, 22% higher than last year and double that of May 2019, as well as the second highest on record after October 2022.

Regional Trends

Housing affordability is still the key driver of demand, and that's reflected in the markets that are appreciating the fastest, Zillow said. The largest monthly home value gains are in the Midwest — which included six of the seven metros with the biggest gains in May. Columbus, Ohio, led the way (2.2% monthly gain), followed closely by Cincinnati; Detroit; Richmond, Va.; and Milwaukee.

Price growth also sprang back in West Coast tech hubs after prices fell significantly there late in 2022, Zillow said. Home values rose faster than the national average for the second straight month in San Jose (1.9%), Seattle (1.7%), and San Francisco (1.4%). 

Inventory Shortages

The lack of new listings has hounded the housing market for almost a year. The flow of new listings was down 23% year over year in May — a milder drop than in April, but nearly equal to that of March, the report said.

The chief driver is still higher mortgage rates, which make a new loan unattractive when the majority of mortgaged homes are financed for less than 4%, Zillow said. Even without intentions to buy again, anyone with a mortgage at a rate under 4% might be loath to sell when there's a possibility to rent out the home for more than their carrying costs, it said.

The lack of new listings, combined with the demand from buyers, has driven prices up and total inventory down to record lows for this time of year. The number of homes for sale on Zillow in May was 3.1% lower than last year — the former low-water mark — and 46% below that of May 2019. 

Sales measured by newly pending listings climbed 9.5% from April, shrinking the year-over-year decline to 18% in May and marking steady improvement since March. While this looks low in comparison to the hot pandemic era, sales figures are close to pre-pandemic standards, Zillow said. 

Pending sales peaked in May in 2018, 2019, and 2022; the weeks ahead will reveal if that seasonal pattern repeats itself, or if the buying season stretches into summer, as it did in 2020 and 2021, Zillow said.

About the author
David Krechevsky was an editor at NMP.
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