Homebuyers responded to modest affordability improvements in June, helping reverse a slowdown in sales even as the rapid growth in housing inventory began to taper off.
According to Zillow's June Market Report, existing home sales rose 5.9% year over year and 9.2% from May, marking a rebound after annual sales declined in May. At the same time, lower mortgage rates pushed the typical monthly mortgage payment 2.5% below year-ago levels, giving buyers more purchasing power despite home values remaining near record highs.
For mortgage professionals, the report offers another sign that easing financing costs are beginning to translate into stronger purchase activity rather than simply generating more buyer interest.
"The market wrestled with some uncertainty throughout the spring shopping season, but mortgage rates declining from their mid-spring peak have added some extra heat as we head into an already toasty summer," said Zillow Chief Economist Mischa Fisher.
The typical U.S. home value reached $372,057 in June, up 1.1% from a year earlier and 0.7% from May, according to Zillow's Home Value Index. While prices continued to rise, annual appreciation remained relatively modest compared to recent years.
Mortgage affordability also improved. Assuming a 20% down payment and excluding taxes and insurance, the typical monthly mortgage payment fell to $1,884 — 2.5% lower than a year earlier. Zillow attributed much of that improvement to mortgage rates that were more than 20 basis points below the same period last year, based on Freddie Mac data.
The report also found that newly pending home sales increased 7.6% from a year ago, suggesting buyers continued to enter the market even before transactions closed.
Inventory Growth Loses Steam
While inventory continued to expand, the pace slowed considerably.
There were 1.39 million homes on the market nationwide in June, up just 0.9% from a year earlier — the smallest annual inventory increase since December 2023. Inventory also rose 2% from May.
New listings totaled 403,811, up 3% year over year after declining in May, although they slipped 4.6% on a monthly basis.
The slowdown suggests much of the inventory rebuilding that characterized the past year may be beginning to level off rather than accelerate.
One notable shift emerged across price segments. Zillow said lower-priced homes recorded the strongest gains in both new listings and sales activity, the first time that has occurred since 2022. Fisher described the trend as "k-shaped," with lower-priced homes showing softer price appreciation while seeing stronger market activity.
Competition Remains Steady
Despite improving sales, market conditions remained relatively balanced.
Homes spent a median of 20 days on the market before going pending, unchanged from a year ago and two days longer than in May.
Price reductions became slightly more common than earlier this spring but remained below last year's level. About 25.8% of listings received a price cut in June, compared with 26.6% a year earlier.
Meanwhile, 30.3% of homes sold above their list price in May, the latest month available, down slightly from 31.1% a year earlier.
What It Means
For originators, Zillow's report adds to a growing body of evidence that modest improvements in affordability are beginning to convert pent-up demand into purchase transactions.
Recent housing reports have pointed to a similar trend. Realtor.com recently reported that asking prices declined while pending sales continued to increase, and First American found annual home-price appreciation remained below 1% for a ninth consecutive month. Together with Zillow's latest data, those reports suggest the purchase market is stabilizing through slower price growth and modestly lower financing costs — not through a sharp correction in home values.
That could create more purchase opportunities during the second half of the year, particularly among first-time and entry-level buyers, where Zillow said listing activity and sales are strengthening. At the same time, the slowing pace of inventory growth suggests the market may be moving toward a more balanced environment rather than becoming heavily tilted in buyers' favor.
