The housing market is thawing out before winter even begins this year, according to the Zillow November Market Report. Home value growth is trending upwards while home inventory is trending downwards, suggesting a more competitive market is in the cards this winter.
"Home buyers angling for a bargain this winter are finding the shelves nearly bare, as inventory has shrunk even faster than in a typical November," said Zillow senior economist Jeff Tucker. "Buyers will find some silver linings to this cloudy winter market, like fewer bidding wars and the typical home lingering longer on the market before the seller accepts an offer. But that's small comfort to buyers after a year in which prices have risen by almost 20%."
U.S. home values rose 1.2% from October and are now 19.3% higher than they were last year, representing record-high annual growth in home values. Although monthly growth slowed gradually over the past three months, it accelerated in 30 of the 50 largest U.S. metropolitan areas. If this trend continues, it could bring an unseasonably warm housing market this winter.
A sharp decline in inventory will ramp up competition and cause prices to ratchet up even more in the coming months. The number of nationwide for-sale listings was down 6.1% from October, and down 17.5% from last year’s already low level of inventory. Compared to the pre-pandemic market of 2019, there are 37.8% fewer homes on the market across the U.S. Overall, inventory fell in all large metros where data is available.
The downward trend in inventory is expected to continue as mortgage forbearance offerings expire for most borrowers who participated. Some expected that the end of forbearance would trigger a wave of forced sales from homeowners who could no longer afford to make payments once they came due again. Judging by the results, most would say the program achieved its goal of keeping people in their homes.
Zillow economists believe the growth in home values can be explained by market fundamentals; demographic realities will keep demand high for the foreseeable future, and “there is no quick fix to the inventory crunch.” Within the next 14 months, Zillow economists predict home values will rise 14.3%, which is significantly slower than the current pace of growth, but also marks the highest annual growth in Zillow’s records before June.
Economists also predict that existing home sales will end 2021 at 6.13 million, growing 8.6% year-over-year, and rise to more than 6.5 million next year.
Despite all the warning signs of a highly competitive market this winter, there is a nugget of good news for homebuyers wanting to get in on the action. Homes lasted one day longer on the market than they did in October, allowing more time for buyers to assess their decision.
In typical fashion, rent growth is also slowing as the winter season approaches. The typical U.S. rent is up 15.2% year-over-year, but monthly growth fell to 0.9% – the first time rent has grown less than 1% since March.
Rents are growing the fastest in New Orleans (+3.1% month-over-month), Miami (+2.7%) and Hartford (+1.8%). However, typical rent fell month-over-month in several markets, such as Buffalo (-1.1%), Minneapolis–St. Paul (-0.4%) and Virginia Beach (-0.3%).
