With the holiday season in full gear, homebuyers across the U.S. have received a welcome gift: a decline in mortgage rates from their 23-year high.
The latest Zillow market report shows monthly costs for a new mortgage are falling, inventory is trending back toward normal, and price cuts are uncharacteristically common.
"Despite high-cost headwinds, buyers have a few things to be thankful for in today's market," said Zillow Chief Economist Skylar Olsen. "Home prices are cooling down faster than normal as new listings from existing owners and total inventory slowly recover. Mortgage rates are still above 7%, but price cuts are surprisingly common, and mortgage costs eased a bit. These factors favor buyers who are reluctant to pause their home search in the off-season."
Zillow's report points to several trends. The first is that monthly mortgage costs on a typical home purchase saw a 1.5% decrease from October to November. Secondly, mortgage payments as a share of household income dropped from an all-time high of 40.4% in October to 38.6% in November. And finally, new listings are slowly recovering, with the gap between current levels and pre-pandemic figures shrinking to just 14.1%. However, total inventory is still down by 37.2% compared to pre-pandemic levels.
Price cuts are becoming increasingly common, with a significant percentage of listings undergoing price reductions in November. The share of listings that saw a price cut in November is unseasonably high at 22.6% – even more so than October's rate of 25%, according to the report. The company said agents are updating pricing strategies as persistently high mortgage rates weigh on buyers.
The Zillow Home Value Index experienced a 0.4% decrease from October to November. Hartford, Milwaukee, and San Diego witnessed the strongest annual growth in home values. New Orleans, Austin, and San Antonio saw the most significant annual declines in home values.
