Homeowners list while buyers hang back, pushing inventory higher

Rhea-AI Summary

The latest Zillow market report reveals a significant increase in home listings, with a 13% rise compared to last year, signaling that homeowners are breaking free from rate lock. However, buyer hesitation persists, leading to a 22% year-over-year increase in inventory. Despite this, inventory remains 34% below pre-pandemic levels. Home value growth has slowed, with typical home values appreciating by 3.9% year-over-year in May, down from 4.4% in April. Zillow forecasts a modest 0.4% increase in home values for 2024, with a 1.4% decline anticipated through May 2025. Market conditions are becoming more favorable for buyers, with nearly 24% of homes for sale receiving price cuts in May. Regional disparities exist, with the West Coast and coastal South seeing the highest increase in new listings. Major Florida markets lead in overall inventory growth due to strong new construction.

Positive

• New listings rose nearly 13% year-over-year, indicating increased homeowner activity.
• Inventory levels rose by 22% compared to last year, reducing the pandemic-era deficit.
• Home value appreciation slowed to a healthier, more sustainable rate of 3.9% year-over-year in May.
• Zillow forecasts a modest increase in home values for 2024, with a slight decline by mid-2025.
• Increased inventory indicates a potential shift towards a more balanced market, favoring buyers.
• Strong new construction in major Florida markets has led to significant inventory growth.

Negative

• Buyer hesitation persists, with sales in May 6% lower than last year.
• Despite inventory growth, levels remain 34% below pre-pandemic norms.
• Home value growth is expected to slow further, with a 1.4% decline projected through May 2025.
• Nearly one-quarter of homes for sale received price cuts in May, indicating potential market softening.
• Inflation and high mortgage rates continue to impact first-time buyers, reducing their purchasing power.

Insights

Financial Analyst

The recent report from Zillow provides key insights into the current dynamics of the U.S. housing market. Notably, new listings have increased by 13 compared to last year, while inventory has risen by 22, helping to ease the previous deficit caused by the pandemic. This is important as it indicates a shift in the market dynamics where supply is starting to catch up with demand. However, the fact that sales are 6 lower than last year suggests that buyers are still hesitant, likely due to high mortgage rates and inflation.

From a financial perspective, the cooling of home value appreciation, which slowed from 4.4 in April to 3.9 in May, points to a more balanced market. This could be beneficial for potential buyers who have been priced out in recent years. Zillow's forecast of a 0.4 increase in home values by the end of 2024 and a 1.4 decline through May 2025 indicates a stabilization that could lead to more predictable investment outcomes.

For retail investors, this shift toward a balanced market may present opportunities to invest in real estate at more reasonable prices. However, the ongoing high mortgage rates and inflation could continue to deter first-time buyers, impacting overall demand. This scenario needs to be monitored closely as it develops.

Market Research Analyst

The Zillow report highlights a significant increase in new listings, particularly in markets like the West Coast and coastal South, including San Diego, Seattle, Charlotte and the San Francisco Bay Area. This regional data is important for investors to understand where supply is increasing the most, potentially leading to better buying opportunities in these areas. Additionally, the accumulation of inventory in major Florida markets due to strong new construction is another key point, as it suggests that builders are responding to the pent-up demand from the pandemic.

The shift in buyer behavior, with competition easing and more listings seeing price cuts, indicates a market transitioning from a strong seller's market to a more neutral one. Nearly one-quarter of homes for sale received a price cut in May, the highest share in the past six years for this time of year. For investors, this trend could mean more opportunities to negotiate better deals on properties.

Retail investors should consider these regional differences and the overall cooling market when making investment decisions. Markets that are shifting toward buyers might provide more negotiating power and potentially better long-term investment opportunities.

Home value growth eases along with competition – price relief may be on the horizon

• Homeowners are breaking free from rate lock — new listings rose nearly 13% since last year.
• Inventory is accumulating, rising 22% over last year and reducing the pandemic-era deficit.
• Home value appreciation slowed in May, and forecast points to prices easing over the next year.

SEATTLE, June 12, 2024 /PRNewswire/ -- Home sellers are returning to the market, but they're finding buyers hesitating, according to the latest Zillow® market report.¹ New listings of houses outpaced sales in May, allowing buyer competition and price growth to cool — and further price relief is in the forecast.

"Rate lock's hold seems to be loosening — homeowners who may have put off listing their homes are done waiting. But just as more choices sprang up for sale, buyers turned on cruise control," said Orphe Divounguy, Zillow senior economist. "Inflation has hit younger households hardest, and stubbornly high rates have pushed a mortgage out of reach for many first-time buyers. That has cooled competition for houses. If these trends hold, we're likely to see price growth flatten or tick down over the next year."

Inventory infusion
New listings from sellers took a larger-than-average step up, rising 8% from April to May, and now stands 13% above last year's extremely low level. The effects of "rate lock" — when owners hold onto their existing homes and low-rate mortgages — are weakening over time. A Zillow survey of recent sellers found a large majority (about 80%) were influenced by life events, such as getting married or having a child, and not necessarily by optimal financial conditions. 

But buyers aren't matching sellers' enthusiasm; sales in May were 6% lower than last year.² This helped partially restock the housing shelves, with the number of homes on the market rising 22% compared to last year's near record-low level. Inventory is still 34% below pre-pandemic norms, but that's the smallest deficit in more than three years. 

New listings rose the most annually on the West Coast and coastal South, in San Diego, Seattle, Charlotte, Raleigh and the San Francisco Bay Area. Compared to last year, total inventory accumulated the most in major Florida markets, where strong new construction has helped refill the coffers. Buyers saw more listings month over month in every major market except Miami. 

Competition and appreciation ease
As a result, competition among buyers eased in May, and home price appreciation cooled with it. Growth in typical home values slowed from 4.4% year over year in April to 3.9% in May — still a healthy, normal rate — while monthly appreciation ticked down from 1.2% in April to 0.8% in May. Home values are still up significantly — more than 45% — since before the pandemic. 

Prices have fallen year over year in New Orleans, Austin and San Antonio, while appreciation is strongest in the Northeast and coastal California.

Renters struggling to save up for a down payment may get a slight reprieve in the coming year. Zillow forecasts home values will end 2024 up 0.4% on the year, and tick down 1.4% through May 2025. 

What it means for buyers and sellers
Zillow's market heat index shows the nation is becoming a bit friendlier for buyers and is headed toward "neutral" territory, but sellers still hold a slight advantage. Buffalo, Hartford and San Jose are the top markets for sellers among the 50 largest metro areas. New Orleans, Miami, Jacksonville and Memphis are all tilted toward buyers, giving those in the market better leverage in negotiations.  

Nationwide, nearly one-quarter of all homes for sale received a price cut in May, the highest share in the past six years for this time of year. There's a good chance that buyers can purchase a lingering property for less than list price. This environment makes experienced agents all the more valuable for both buyers and sellers, to find and negotiate deals for buyers, and to price and market properties correctly for sellers.  

Size rank	Metropolitan Area	May Zillow Home Value Index (ZHVI) (Raw)	ZHVI Change,  Year over Year (YoY)	ZHVI Change  Since Before the Pandemic	Market Favors**	Share of Listings with a Price Cut	Inventory Change, YoY	New Listings Change, YoY
0	United States	$360,310	3.9 %	45.3 %	Sellers	23.9 %	22.1 %	12.6 %
1	New York, NY	$658,603	7.1 %	31.6 %	Strong sellers	13.8 %	-4.6 %	7.3 %
2	Los Angeles, CA	$965,506	8.9 %	42.8 %	Strong sellers	18.1 %	21.1 %	21.3 %
3	Chicago, IL	$321,733	7.0 %	35.7 %	Strong sellers	21.1 %	3.0 %	6.6 %
4	Dallas, TX	$379,252	1.1 %	46.9 %	Sellers	32.0 %	28.9 %	12.5 %
5	Houston, TX	$309,854	1.6 %	38.6 %	Neutral	28.3 %	25.8 %	11.6 %
6	Washington, DC	$569,602	4.7 %	30.7 %	Strong sellers	19.7 %	11.3 %	16.7 %
7	Philadelphia, PA	$362,178	6.7 %	43.8 %	Sellers	20.6 %	5.8 %	12.2 %
8	Miami, FL	$490,511	6.6 %	62.0 %	Buyers	24.5 %	43.5 %	10.8 %
9	Atlanta, GA	$386,798	4.0 %	56.3 %	Neutral	28.0 %	37.5 %	23.4 %
10	Boston, MA	$701,740	8.3 %	42.5 %	Strong sellers	16.9 %	9.7 %	15.6 %
11	Phoenix, AZ	$461,390	4.2 %	53.0 %	Sellers	35.2 %	13.6 %	26.6 %
12	San Francisco, CA	$1,188,868	5.4 %	25.5 %	Strong sellers	18.6 %	27.1 %	29.0 %
13	Riverside, CA	$585,999	6.5 %	52.1 %	Sellers	22.9 %	23.7 %	16.7 %
14	Detroit, MI	$254,098	6.3 %	40.4 %	Sellers	18.1 %	6.2 %	7.8 %
15	Seattle, WA	$754,332	6.4 %	44.8 %	Strong sellers	22.8 %	27.1 %	31.4 %
16	Minneapolis, MN	$376,461	1.3 %	27.4 %	Strong sellers	21.7 %	22.7 %	15.4 %
17	San Diego, CA	$962,786	11.1 %	56.8 %	Sellers	22.9 %	44.4 %	32.5 %
18	Tampa, FL	$381,414	2.8 %	61.8 %	Buyers	36.2 %	60.6 %	24.7 %
19	Denver, CO	$593,732	1.9 %	36.1 %	Sellers	32.9 %	32.2 %	24.5 %
20	Baltimore, MD	$387,455	3.8 %	31.3 %	Sellers	21.9 %	14.7 %	16.3 %
21	St. Louis, MO	$253,143	4.5 %	40.2 %	Strong sellers	19.5 %	12.8 %	5.8 %
22	Orlando, FL	$397,859	3.3 %	54.6 %	Neutral	30.0 %	49.9 %	20.7 %
23	Charlotte, NC	$386,181	5.1 %	59.1 %	Neutral	24.9 %	27.3 %	30.4 %
24	San Antonio, TX	$288,333	-2.2 %	34.7 %	Neutral	32.5 %	29.3 %	3.9 %
25	Portland, OR	$554,465	1.6 %	32.3 %	Strong sellers	25.8 %	23.0 %	14.2 %
26	Sacramento, CA	$586,997	4.3 %	34.5 %	Strong sellers	25.0 %	19.8 %	21.4 %
27	Pittsburgh, PA	$217,968	6.1 %	33.3 %	Sellers	23.1 %	5.6 %	13.0 %
28	Cincinnati, OH	$287,754	5.2 %	47.5 %	Strong sellers	22.0 %	16.1 %	12.1 %
29	Austin, TX	$463,202	-4.1 %	42.4 %	Neutral	30.7 %	14.7 %	14.6 %
30	Las Vegas, NV	$429,369	7.1 %	44.4 %	Sellers	23.3 %	3.5 %	23.1 %
31	Kansas City, MO	$306,002	3.9 %	45.8 %	Strong sellers	23.3 %	27.8 %	15.5 %
32	Columbus, OH	$314,999	5.5 %	49.7 %	Strong sellers	24.3 %	25.9 %	21.8 %
33	Indianapolis, IN	$281,991	3.5 %	50.7 %	Sellers	27.9 %	21.2 %	12.2 %
34	Cleveland, OH	$230,953	7.5 %	46.3 %	Strong sellers	18.7 %	0.4 %	7.1 %
35	San Jose, CA	$1,644,202	12.7 %	41.7 %	Strong sellers	14.5 %	21.0 %	28.5 %
36	Nashville, TN	$445,552	2.1 %	48.7 %	Neutral	32.8 %	17.5 %	13.5 %
37	Virginia Beach, VA	$351,401	5.5 %	41.0 %	Sellers	19.5 %	17.1 %	10.1 %
38	Providence, RI	$483,313	8.2 %	51.6 %	Strong sellers	15.4 %	9.0 %	11.0 %
39	Jacksonville, FL	$360,547	1.4 %	52.3 %	Buyers	32.7 %	45.6 %	16.2 %
40	Milwaukee, WI	$348,435	6.5 %	42.3 %	Strong sellers	11.4 %	12.8 %	17.1 %
41	Oklahoma City, OK	$235,307	2.4 %	42.9 %	Neutral	27.2 %	23.1 %	12.6 %
42	Raleigh, NC	$448,858	3.0 %	53.4 %	Sellers	29.2 %	35.3 %	29.1 %
43	Memphis, TN	$242,300	1.8 %	46.6 %	Buyers	27.1 %	24.2 %	5.1 %
44	Richmond, VA	$372,353	5.0 %	46.9 %	Strong sellers	20.7 %	15.9 %	12.6 %
45	Louisville, KY	$258,522	3.7 %	37.0 %	Sellers	23.9 %	27.7 %	20.1 %
46	New Orleans, LA	$241,191	-5.9 %	5.0 %	Buyers	27.0 %	22.3 %	5.8 %
47	Salt Lake City, UT	$548,530	2.7 %	46.3 %	Sellers	30.1 %	19.4 %	14.2 %
48	Hartford, CT	$363,763	11.6 %	56.3 %	Strong sellers	12.0 %	15.9 %	16.2 %
49	Buffalo, NY	$264,111	7.5 %	51.4 %	Strong sellers	14.5 %	1.8 %	2.6 %
50	Birmingham, AL	$254,484	0.0 %	37.6 %	Sellers	24.1 %	22.0 %	12.0 %

*	Table ordered by market size
**	Based on Zillow Market Heat Index
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.
2	Tracked by Zillow's Sales Count NowCast.

About Zillow Group:
Zillow Group, Inc. (Nasdaq: Z and ZG) is reimagining real estate to make home a reality for more and more people. As the most visited real estate website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, dedicated partners and agents, and easier buying, selling, financing and renting experiences. 

Zillow Group's affiliates, subsidiaries and brands include Zillow^®, Zillow Premier Agent^®, Zillow Home Loans℠, Trulia^®, Out East^®, StreetEasy^®, HotPads^®, ShowingTime+℠, Spruce^® and Follow Up Boss^®. 

All marks herein are owned by MFTB Holdco, Inc., a Zillow affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). © 2023 MFTB Holdco, Inc., a Zillow affiliate.

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SOURCE Zillow

FAQ

What is causing the increase in new home listings?

Homeowners are breaking free from rate lock, resulting in a 13% rise in new listings over the past year.

How much has home inventory increased compared to last year?

Home inventory has increased by 22% year-over-year, though it remains 34% below pre-pandemic norms.

What is the current rate of home value appreciation?

Home value appreciation slowed to 3.9% year-over-year in May, down from 4.4% in April.

What is the forecast for home values in 2024 and 2025?

Zillow forecasts a modest 0.4% increase in home values for 2024, with a 1.4% decline anticipated through May 2025.

Which regions saw the highest increase in new home listings?

The West Coast and coastal South, including cities like San Diego, Seattle, and San Francisco Bay Area, saw the highest increase in new listings.

How are buyers reacting to the increased inventory?

Buyer hesitation persists, with sales in May 6% lower than last year, leading to a more balanced market.

What percentage of homes for sale received price cuts in May?

Nearly one-quarter of homes for sale received price cuts in May, the highest share in the past six years for this time of year.