Seasonal cooling, cost strains bring housing market closer to 'normal'

Rhea-AI Summary

The housing market faced continued challenges as affordability issues persisted, according to Zillow's December data. Monthly mortgage costs decreased by over $100 but remain nearly double 2019 levels at approximately $1,795. The share of homes sold above list price fell to 28%, the lowest since June 2020, indicating a cooling market. It now takes about 30 days to sell a home, up from six days in April 2022. Year-over-year home sales are down 33%, while inventory has increased 16% compared to last year. Notably, typical rents remain high at $1,981, up 7.4% year-over-year.

Positive

• Monthly mortgage costs have decreased over $100 from peak levels.
• The housing market shows signs of renewed buyer interest and potential sales recovery.

Negative

• The share of homes sold above list price dropped to 28%, indicating decreased buyer competitiveness.
• Sales are down 33% year-over-year, reflecting ongoing affordability challenges.
• Rents remain high at $1,981, up 7.4% year-over-year, adding to affordability concerns.

Lower mortgage rates bring monthly costs down, but the housing market is still reeling from affordability problems

• The share of homes sold above list price fell to 28%, the lowest rate since June 2020.
• Monthly mortgage costs have fallen more than $100 from peak as rates have relaxed, but are still nearly double what they were in 2019.
• It takes about 30 days to sell a home, compared to six in April 2022 and 43 in 2019.

SEATTLE, Jan. 19, 2023 /PRNewswire/ -- The housing market continued its return back to earth in December as affordability challenges kept demand in check, the latest Zillow^® data shows. Falling mortgage rates lowered costs slightly, and a number of key indicators inched closer to seasonal norms during what is typically the slowest time of year.

Buyers should appreciate that list prices are once again roughly indicative of the sale price and even slightly aspirational on the part of sellers. Just over a quarter (28%) of homes nationwide sold above their first list price in November (the most recent data). 

That's the lowest portion since June 2020, when the housing market was just getting over the initial shock of COVID-19 and starting to heat up, but it's still higher than the 21% sold above list price in November 2019. Metros with the highest share of homes selling above list price are relatively affordable: Buffalo (63%), Hartford (57%) and Milwaukee (48%). 

"The housing market ended 2022 in a deep freeze, but there are some green shoots pushing up," said Jeff Tucker, senior economist at Zillow. "The recent thaw in mortgage rates has begun to attract some renewed interest from buyers, and home sales are climbing again compared to last year. If rates continue to march down this spring and sellers return in seasonal force, the housing market just might get to have a normal — maybe even boring — year."

Typical time on market — how long a listing waits before going pending — is now up to 30 days. It's a far less frenzied environment than last December's 13 days till pending and the low of just six days that was seen in the past two springs, but still considerably faster than the 43 days to pending before the pandemic, in December 2019. 

Homes in Western metros that were white hot in 2021 are now taking the longest to sell: 68 days in Austin, 57 days in Las Vegas and 55 days in Phoenix. Meanwhile, the fastest-moving markets are more affordable; Hartford, Cincinnati, Kansas City and Columbus all saw median listings go pending in two weeks or less. 

Monthly mortgage costs are now just under $1,800 for a typically valued home after a 20% down payment, a decline of more than $100 from the peak in October. But payments are still 62% higher than last December and are $875 higher than in December 2019. These affordability challenges are dragging demand down from the lofty heights seen earlier in the pandemic. Sales in November measured by Zillow's nowcast were down 33% year over year and 16% compared to 2019. 

Total inventory is declining roughly in line with pre-pandemic seasonal norms and is gaining ground over last year, rising from a 26% annual deficit in January 2022 to now standing at 16% above the previous year.

But the recovery of inventory is being driven by falling sales, not the addition of new listings. Still high yet falling mortgage rates may be convincing current homeowners to hold on to their property until the spring selling season. December is usually the slowest time of year for sellers to list, but new additions in December were significantly lower than in 2019, and new for-sale listing levels have lost ground to the previous year for eight consecutive months.

Typical rents nationwide slid for three straight months to close out 2022, but at $1,981, they are still up 7.4% year over year. 

Zillow will roll out a new Zillow Home Value Index, based on the more accurate neural Zestimate^® model, in next month's report. 

Metropolitan Area*	December Zillow Home Value Index (ZHVI) (Raw)	Monthly Mortgage Cost (at 20% Down)	Monthly Mortgage Cost Change, Year over Year (YoY)	Monthly Mortgage Cost Change, Month over Month	Total Inventory Change, YoY	Median Days on Market Change, YoY	Zillow Observed Rent Index (ZORI)
United States	$356,819	$1,795	62.5 %	-0.7 %	15.9 %	17	$1,981
New York, NY	$619,155	$3,105	58.4 %	-0.5 %	-8.7 %	4	$3,062
Los Angeles, CA	$893,468	$4,512	52.4 %	-1.0 %	22.9 %	21	$2,917
Chicago, IL	$307,549	$1,552	57.8 %	-0.8 %	-12.5 %	12	$1,839
Dallas–Fort Worth, TX	$382,179	$1,944	66.9 %	-1.1 %	11.9 %	13	$1,802
Philadelphia, PA	$344,532	$1,724	60.9 %	-0.1 %	-5.3 %	7	$1,777
Houston, TX	$311,338	$1,573	64.4 %	-0.8 %	23.0 %	22	$1,654
Washington, DC	$551,067	$2,770	55.0 %	-0.5 %	-0.4 %	17	$2,198
Miami–Fort Lauderdale, FL	$476,860	$2,391	79.9 %	-0.4 %	22.7 %	17	$2,771
Atlanta, GA	$380,619	$1,916	65.6 %	-0.8 %	21.3 %	26	$1,953
Boston, MA	$642,106	$3,230	56.2 %	-0.9 %	8.3 %	10	$2,874
San Francisco, CA	$1,348,952	$6,832	47.2 %	-1.5 %	19.6 %	25	$3,100
Detroit, MI	$238,838	$1,198	57.0 %	-0.5 %	13.8 %	13	$1,421
Riverside, CA	$570,580	$2,888	58.1 %	-1.0 %	39.7 %	29	$2,514
Phoenix, AZ	$437,703	$2,225	53.1 %	-1.5 %	40.4 %	40	$1,882
Seattle, WA	$725,882	$3,761	54.4 %	-2.1 %	75.5 %	35	$2,166
Minneapolis– St. Paul, MN	$370,054	$1,862	53.8 %	-0.7 %	5.9 %	18	$1,614
San Diego, CA	$865,499	$4,392	55.5 %	-1.4 %	32.9 %	23	$2,991
St. Louis, MO	$245,958	$1,236	60.2 %	-0.4 %	2.4 %	9	$1,291
Tampa, FL	$387,110	$1,951	75.4 %	-0.8 %	57.0 %	24	$2,093
Baltimore, MD	$378,283	$1,903	57.2 %	-0.5 %	-6.5 %	10	$1,764
Denver, CO	$614,979	$3,107	56.2 %	-1.1 %	61.0 %	31	$1,970
Pittsburgh, PA	$209,325	$1,050	51.5 %	-0.5 %	3.0 %	9	$1,328
Portland, OR	$556,622	$2,816	53.3 %	-1.1 %	29.0 %	32	$1,875
Charlotte, NC	$384,179	$1,936	69.0 %	-0.8 %	5.3 %	20	$1,781
Sacramento, CA	$582,243	$2,950	51.4 %	-1.3 %	33.2 %	25	$2,264
San Antonio, TX	$336,791	$1,703	63.6 %	-1.0 %	47.8 %	29	$1,481
Orlando, FL	$398,331	$2,008	74.4 %	-0.8 %	37.8 %	23	$1,996
Cincinnati, OH	$267,706	$1,338	62.0 %	-0.2 %	-7.8 %	5	$1,516
Cleveland, OH	$219,740	$1,101	60.8 %	-0.4 %	0.2 %	9	$1,331
Kansas City, MO	$293,088	$1,469	61.9 %	-0.1 %	10.0 %	9	$1,356
Las Vegas, NV	$418,083	$2,101	57.2 %	-1.6 %	59.0 %	47	$1,800
Columbus, OH	$304,421	$1,522	62.4 %	-0.6 %	14.1 %	9	$1,409
Indianapolis, IN	$273,939	$1,378	65.0 %	-0.6 %	26.6 %	15	$1,443
San Jose, CA	$1,521,049	$7,724	50.9 %	-2.0 %	-11.0 %	6	$3,216
Austin, TX	$531,197	$2,700	47.2 %	-1.9 %	53.7 %	46	$1,869
Virginia Beach, VA	$336,585	$1,687	61.2 %	-0.4 %	-9.4 %	7	$1,629
Nashville, TN	$446,141	$2,254	68.4 %	-1.2 %	69.0 %	33	$1,856
Providence, RI	$446,479	$2,250	58.1 %	-0.8 %	-6.9 %	8	$1,899
Milwaukee, WI	$275,271	$1,371	60.0 %	0.2 %	-34.4 %	0	$1,194
Jacksonville, FL	$374,244	$1,884	72.7 %	-0.9 %	56.9 %	34	$1,757
Memphis, TN	$237,529	$1,192	65.0 %	-0.5 %	15.7 %	17	$1,481
Oklahoma City, OK	$226,242	$1,132	65.4 %	-0.1 %	22.5 %	14	$1,306
Louisville, KY	$245,203	$1,231	59.9 %	-0.4 %	0.6 %	10	$1,281
Hartford, CT	$326,038	$1,628	62.1 %	0.1 %	-20.4 %	3	$1,667
Richmond, VA	$347,267	$1,739	62.7 %	-0.4 %	7.9 %	9	$1,548
New Orleans, LA	$266,726	$1,343	56.1 %	-0.8 %	52.1 %	28	$1,525
Buffalo, NY	$247,238	$1,234	59.7 %	-0.1 %	4.9 %	8	$1,218
Raleigh, NC	$433,424	$2,205	62.7 %	-1.9 %	46.0 %		$1,744
Birmingham, AL	$252,018	$1,259	62.1 %	-0.3 %	29.0 %	18	$1,293
Salt Lake City, UT	$569,969	$2,901	53.5 %	-1.5 %	90.8 %	34	$1,751

*Table ordered by market size 

About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter. As the most visited real estate website in the United States, Zillow^® and its affiliates offer customers an on-demand experience for selling, buying, renting, or financing with transparency and ease. 

Zillow Group's affiliates and subsidiaries include Zillow^®; Zillow Premier Agent^®; Zillow Home Loans™; Zillow Closing Services™; Trulia^®; Out East^®; StreetEasy^®; HotPads^®; and ShowingTime+™, which houses ShowingTime^®, Bridge Interactive^®, and dotloop^®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). 

 

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SOURCE Zillow

FAQ

What is the current state of the housing market according to Zillow?

Zillow reports that the housing market remains challenged by affordability issues, with home sales down 33% year-over-year.

How much have mortgage costs changed recently?

Monthly mortgage costs have decreased by over $100 but are still nearly double what they were in 2019, now averaging around $1,795.

What percentage of homes are selling above list price?

Only 28% of homes sold above their list price in November, the lowest rate since June 2020.

What is the average time to sell a home currently?

The average time to sell a home is now about 30 days, significantly longer than the six days seen in April 2022.

What are the current rental prices reported by Zillow?

Typical rents nationwide are currently $1,981, which is up 7.4% year-over-year.