Home Sellers Return While Buyers Withdraw, Inventory Surges

The tables are beginning to turn on home sellers as more list their homes only to find buyers hesitating, according to the latest Zillow market report. New listings of homes outpaced sales in May, allowing buyer competition and price growth to cool. Looking ahead, price relief is forecasted to continue.

Sellers made a larger-than-expected market return with new listings rising 8% from April to May, and now stand 13% above last year’s extremely low level. Zillow experts are saying its the effects of “rate-lock” weakening over time — "rate lock" meaning homeowners holding onto their existing homes and low-rate mortgages. 

Despite the fact interest rates haven’t budged very much since the year began and economic indicators signal that the Fed may hold rates steady for longer, more home sellers are entering the market. A Zillow survey of recent sellers revealed that a majority (about 80%) were influenced by life events rather than optimal financial conditions, such as getting married or having a child.

It seems home sellers are swapping the “rate lock” effect for the “life-goes-on” effect in which people need to continue living, despite where rates are headed. 

However, buyers aren’t matching sellers’ enthusiasm as sales in May were 6% lower than last year. That partially helped to raise housing inventory; the number of homes on the market is 22% above last year's near record-low level. Although inventory is still 34% below pre-pandemic norms, that's the smallest deficit in more than three years. 

The West Coast and coastal South had the highest increase in new listings compared to last year, within San Diego, Seattle, Charlotte, Raleigh, and the San Francisco Bay Area. But, total inventory accumulated the most in major Florida markets, where new construction has helped restock the housing shelves. Buyers saw more listings month over month in every major market except Miami. 

Growth in typical home values slowed from 4.4% year over year in April to 3.9% in May — still a healthy, normal rate — while monthly appreciation ticked down from 1.2% in April to 0.8% in May. Home values are still up significantly — more than 45% — since before the pandemic. 

Prices have fallen year over year in New Orleans, Austin, and San Antonio, while appreciation is strongest in the Northeast and coastal California.

Zillow forecasts that home values will be up 0.4% by the end of 2024, and tick down 1.4% through May 2025.