November Brought Minor Relief to Affordability

For home buyers looking to squeeze their budgets a bit of relief was found in November as the average cost of a mortgage payment went down by about $100 by the end of the month due to a combination of declining home values and lower mortgage rates. 

Still, monthly mortgage costs are up $720—or 66.1%—year-over-year. 

According to Zillow’s latest Market Report, the typical home is now worth $357,733, 0.2% less than in October and down 0.5% from market peak which occurred in June 2022. Increases in the nominal interest rate by the Federal Reserve are most to blame for the currently chilling market. But a recent pullback in mortgage rates have brought costs down for the first time since July, the second time in the past 19 months. 

According to Zillow, large scale affordability concerns are not expected to abate any time soon, but the most recent news gives hope that affordability will at least stabilize going into 2023. 

"The housing market entered a deep freeze this November as buyers paused their purchasing plans, likely till after New Year's in many cases," said Jeff Tucker, Zillow’s Senior Economist. "The two big questions are whether mortgage rates will continue to decline, and whether that will be enough to bring buyers back in time for the spring selling season. In the meantime, those on the prowl for a house will benefit from motivated sellers, unusual bargains and a welcome lack of competition." 

But the slight drop in rates is not going to invigorate the market; between traditional market lulls during the winter months and affordability will continue to weigh on the market. 

According to Zillow, the number of listings that went pending in November fell by 16.5% from October and is down 38% compared to last November. New listings—the flow of existing homes onto the market from sellers—are also anemic, sitting 25.4% lower than last year. Many homeowners who might like to sell their home are being deterred by the higher borrowing cost they'd need to pay on their next home's mortgage. 

At the same time, inventory is up 7% year-over-year, the largest increase since 2018 and the median time on market is now 22 days, up from a low of six days in March 2022 and double from a year ago. 

Click here to see Zillow’s research in its entirety.