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Home Sales Slowing as Inventory Remains Low

According to Zillow's latest market report, home values slipped in September, ending a 2-month slide in which they fell 0.4% from a peak of $359,719 in June. Zillow research revealed that affordability issues are now driving the pullback in activity, reducing the flow of new inventory.

As the housing market continued to cool in September, rebalancing from such high appreciation levels is producing much different conditions across various regions and metros. Current homeowners are deciding to stay put as a result of high home prices and rising mortgage rates. New data also found that among home sellers, 71% are also homebuyers.

Key Findings:

  • The typical U.S. home value was unchanged in September from August
  • Listings now take 19 days to go pending, up from 11 this time last year
  • Active inventory has climbed 3% above year-ago levels, but is still far below pre-pandemic norms
  • Rising rates throughout September have pushed unaffordability to new heights

"The late-summer mortgage rate reprieve brought a short-lived surge of buyers back into the market, proving that many priced-out home shoppers are poised to buy when homeownership becomes more affordable," said Jeff Tucker, Senior Economist at Zillow. "Unfortunately, shoppers this winter are more likely to contend with mortgage rates in the ballpark of 7%, making even this summer's rising rates look modest by comparison. Still, as many rate-sensitive shoppers stay sidelined, those who forge ahead now will find more options and more eager sellers than anytime since the pandemic began."

At the national level, home values stayed roughly steady from August to September, despite dropping slightly in the previous two months. The typical U.S. home value is now $358,283—up 12.9% from last year and nearly $110,000 (43.5%) above 2019. Of the 100 largest metros analyzed, some 50% saw home values rise from August to September.

Home values have fallen the furthest from peak levels in expensive and high-growth metros in the Mountain states and on the West Coast, with the largest drops in Austin (-8.2%), San Francisco (-7.9%) and Salt Lake City (-6.8%). Among the 100 largest U.S. metros, the 17 with the largest home value declines from peak levels are in the West. However, owners in these areas should still have significant equity in their homes; home value appreciation since 2019 ranges from 26% in San Francisco to 65% in Austin.

Data showed sales also slowed significantly in September. The number of newly pending listings fell 18% month over month and are down 29.3% compared to last year, in part because of a sharp deceleration in activity at the end of the month, when rates were highest. Sales are down more than 6% from September 2019. Mortgage rates—the largest driver of monthly payments—rose through September, and are hurting homebuyers' ability to plan for the future.

The flow of new for-sale listings to the market saw an 11.4% drop from August was the third straight month of double-digit declines. Although the flow of new listings typically slows down at this time of year, the decline from this year's spring peak is larger than in 2019. Total inventory is now 3% above levels a year ago, but remains 38% below that of 2019. Considering the drastic decline in new additions to the market, the rise in total inventory is due to listings staying on the market longer. Listings' median time on the market rose from August and now stands at 19 days. That's a more leisurely pace than last year's 11 days on market, but much faster than in September 2019, when listings typically waited a month before the seller accepted an offer.

Homebuyers' still in the market are seeing far less competitive conditions than in months past, giving them more time to decide on a home, less chance of a bidding war and greater leverage in negotiations. Now at 27.5% nationwide, the share of listings with a price cut is also rising—up from 18.3% in 2021 and September 2019's rate of 22.3%. Among the top-100 largest metro areas, those with the largest share of price cuts are Boise (47.8%), Phoenix (45%), Ogden, Utah (44.4%), and Salt Lake City (43.9%).

Typical U.S. asking rents rose only 0.3% in September–the lowest monthly growth rate since January 2021–and are now $2,084 per month. Annual rent growth has also eased steadily from a record-high 17.2% in February to 10.8% in September.Month-over-month growth has declined to a more normal rate of 0.3% — far from the peak of 2.2% seen in July 2021.

To read the full report, including more data, charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].

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