Home shopping early may pay off as price cuts abound
- None.
- None.
Insights
The dynamics of the real estate market as highlighted in the report suggest a nuanced landscape. The swift sale of well-priced homes indicates a seller's market in certain regions, particularly in coastal and Western markets. This trend is a signal to potential investors that properties in these areas are likely to appreciate, thus potentially offering a return on investment. However, the fact that a significant portion of sellers are reducing prices to attract buyers points to a price sensitivity in the market. This could imply that while demand remains robust for properties perceived as offering value, there is resistance at higher price points, possibly due to affordability constraints.
From an investment standpoint, the increase in inventory over the previous year suggests a slight easing of the supply constraints that have characterized the market in recent years. For investors looking at rental properties or flipping opportunities, this may indicate a more favorable buying environment. However, the need for speed in decision-making is emphasized by the rapid pace at which attractive listings are going pending. Strategic investors should monitor these trends closely, as they can have implications for both the timing of market entry and exit strategies.
For stakeholders in the housing industry, including real estate investment trusts (REITs), homebuilders and mortgage lenders, the current market conditions present a mixed picture. The quick turnover of well-priced homes could signal healthy revenue streams for homebuilders and real estate companies. Conversely, the necessity for price cuts for a substantial portion of listings could pressure profit margins and necessitate recalibration of pricing strategies.
Investors in the stock market should consider the implications of these real estate trends on associated sectors. For instance, companies providing home improvement services or consumer financing might experience increased demand as sellers prepare their homes for sale and buyers make purchases. On the other hand, if the trend of price reductions continues, it could reflect broader economic concerns, such as rising interest rates or waning consumer confidence, which could negatively affect the stock prices of companies in the housing sector.
The report's insights into the real estate market can be interpreted within the broader economic context. The activity in expensive, coastal and Western markets could be indicative of regional economic strength, attracting both domestic and international buyers. This could have a ripple effect on local economies, boosting employment in construction, retail and service industries.
However, the prevalence of price cuts suggests that the market is not immune to broader economic pressures, such as potential interest rate hikes or inflationary trends. These factors could affect affordability and mortgage rates, thereby influencing buyer behavior. For long-term economic forecasting, these real estate trends may be early indicators of shifts in consumer spending and investment patterns, which are critical for policymakers and financial institutions to monitor.
Expensive, coastal and Western markets are already heating up as spring season approaches
- Well-priced homes are selling in 29 days, and that will shorten quickly as the shopping season opens.
- Mispriced inventory is lingering, however; an elevated 1 in 5 sellers are cutting prices to find buyers.
- New listings and total inventory are up slightly over last year, an encouraging sign for buyers.
"Some of the homes loitering on the market may just need the right buyer and digital curb appeal to cast a wider net, but many may be overpriced. There are slightly more homes for sale than this time last year, and there is still plenty of competition for well-priced houses," said Zillow Chief Economist Skylar Olsen. "Buyers should prep their credit scores and sellers should prep their properties now — attractive listings are going pending in less than a month, and time on market will shrink in the weeks ahead."
What buyers are seeing
Just over 1 in 5 houses on Zillow saw a price cut in January — that's about equal to last year, but more common than in any of the five preceding years. Those cuts are bringing seller expectations more in line with the market conditions — the typical sold home was on the market for 29 days before going pending, while other homes lingered on the market for months, driving up the typical age of listings on Zillow to 72 days.
Shoppers already touring virtually and in person might be able to negotiate a deal on a house that's been waiting just for them. But that's likely not the case in places where median time on market for sold homes has dropped the most since last year:
So where are the "deals" drying up and where are they plentiful? Price cuts are much less common than a year ago in expensive Western metros:
Price cuts are most prevalent in
There are a few more options available now than last year. Total inventory is up more than
What sellers are seeing
Sellers are still sitting pretty with record home equity. The typical
More than a quarter of homes sold for more than asking price in December, the most recent data available. That's fewer than in the rate-fueled real estate rush of the early pandemic, but slightly more than in December 2022 and far more than before the pandemic, when less than
Metros where sellers are showing up much stronger than last year are
What to expect in coming months
All this points to a relatively competitive home shopping season in which attractive listings are moving quickly. Demographic factors and a relatively strong economy mean vast numbers of millennials and baby boomers looking for houses, even while affordability is still extremely challenging.
Buyers should get their credit in order, talk to a loan officer to understand their budget, and search by monthly payment to make sure their search results stay within their budgets, regardless of mortgage rate swings. Relevant down payment assistance programs are on every Zillow listing.
For sellers, it's important to work with an agent who understands local market conditions and will price their home correctly. Sellers can make their home stand out by upping its online curb appeal — Listing Showcase leads to more views, saves and shares on Zillow.
Metropolitan Area* | January | ZHVI | Median | Share of | Share of | Share of | New |
3.6 % | 29 | 21 % | 17 % | 26 % | 5.8 % | ||
5.6 % | 43 | 12 % | 15 % | 49 % | -6.3 % | ||
7.4 % | 18 | 16 % | 15 % | 44 % | 18.2 % | ||
6.5 % | 19 | 18 % | 22 % | 31 % | -6.2 % | ||
0.5 % | 35 | 27 % | 22 % | 18 % | 18.2 % | ||
0.5 % | 42 | 24 % | 23 % | 14 % | 2.4 % | ||
3.7 % | 9 | 17 % | 16 % | 34 % | -10.0 % | ||
7.0 % | 16 | 20 % | 20 % | 37 % | -10.4 % | ||
7.1 % | 42 | 24 % | 19 % | 12 % | 21.9 % | ||
3.7 % | 33 | 24 % | 22 % | 22 % | 17.3 % | ||
8.0 % | 9 | 12 % | 14 % | 50 % | 5.1 % | ||
2.8 % | 29 | 31 % | 21 % | 16 % | 14.5 % | ||
1.7 % | 14 | 14 % | 10 % | 48 % | 15.3 % | ||
5.3 % | 29 | 19 % | 18 % | 37 % | 20.1 % | ||
5.7 % | 19 | 19 % | 21 % | 34 % | -0.3 % | ||
3.2 % | 9 | 16 % | 13 % | 29 % | 2.0 % | ||
1.6 % | 41 | 17 % | 15 % | 30 % | 19.1 % | ||
9.6 % | 13 | 18 % | 17 % | 41 % | 27.7 % | ||
3.0 % | 36 | 33 % | 26 % | 14 % | 19.2 % | ||
1.1 % | 19 | 21 % | 20 % | 22 % | 7.8 % | ||
3.7 % | 14 | 21 % | 21 % | 38 % | -6.1 % | ||
5.6 % | 12 | 20 % | 17 % | 34 % | -4.6 % | ||
3.5 % | 36 | 27 % | 23 % | 13 % | 18.1 % | ||
3.7 % | 21 | 22 % | 21 % | 28 % | 9.5 % | ||
-3.2 % | 57 | 27 % | 24 % | 16 % | 1.5 % | ||
1.9 % | 37 | 21 % | 18 % | 26 % | -8.2 % | ||
2.5 % | 17 | 19 % | 16 % | 33 % | 19.7 % | ||
4.8 % | 28 | 23 % | 19 % | 25 % | -4.1 % | ||
5.8 % | 12 | 23 % | 22 % | 26 % | -2.4 % | ||
-6.2 % | 72 | 21 % | 18 % | 10 % | -7.8 % | ||
3.1 % | 27 | 20 % | 22 % | 18 % | 10.8 % | ||
5.2 % | 13 | 20 % | 17 % | 30 % | -7.7 % | ||
6.0 % | 10 | 24 % | 21 % | 31 % | 1.9 % | ||
2.8 % | 26 | 25 % | 22 % | 16 % | 12.1 % | ||
6.9 % | 15 | 21 % | 18 % | 34 % | -6.8 % | ||
7.2 % | 10 | 11 % | 12 % | 55 % | 15.3 % | ||
1.0 % | 40 | 26 % | 19 % | 13 % | -17.2 % | ||
5.7 % | 35 | 20 % | 18 % | 32 % | 2.7 % | ||
8.3 % | 14 | 15 % | 16 % | 48 % | 6.5 % | ||
0.4 % | 46 | 28 % | 24 % | 13 % | 12.6 % | ||
7.1 % | 31 | 14 % | 15 % | 29 % | 6.0 % | ||
3.5 % | 31 | 25 % | 19 % | 22 % | 2.6 % | ||
2.1 % | 19 | 24 % | 22 % | 24 % | 6.7 % | ||
0.5 % | 38 | 22 % | 15 % | 16 % | -6.4 % | ||
4.8 % | 10 | 18 % | 19 % | 39 % | 3.0 % | ||
4.3 % | 20 | 24 % | 23 % | 19 % | -5.2 % | ||
-8.2 % | 55 | 22 % | 21 % | 10 % | -3.6 % | ||
0.9 % | 31 | 25 % | 18 % | 23 % | 10.2 % | ||
12.2 % | 7 | 16 % | 20 % | 64 % | -5.8 % | ||
6.9 % | 17 | 14 % | 17 % | 64 % | -10.1 % | ||
1.1 % | 33 | 20 % | 14 % | 25 % | -0.3 % |
*Table ordered by market size
1 The Zillow® Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Research. For more information, visit www.zillow.com/research.
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FAQ
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