SEATTLE — Buyers and sellers are both pulling away as soaring mortgage rates have stabilized the housing market in a more balanced state, according to Zillow’s latest market report. Home values remained nearly flat in October as new inventory dwindled and sales continued to fall due to the pandemic frenzy.
“October home prices remained in suspended animation as more buyers, but especially sellers, took a wait-and-see approach to market conditions,” said Skylar Olsen, chief economist at Zillow. “The drop in home sales is a mark of a lull in the housing market, but right now potential sellers sensitive to the loss of their historically low mortgage rates have just as much, if not more, reason to wait. a robust spring and hope for mortgage rate relief.. With renewed competition, buyers hoping for aggressive price cuts could be disappointed in all but the foamiest pandemic-era markets.
Rapidly rising mortgage rates, coupled with stubbornly high house prices, are leading to a drastic decline in affordability. The share of income spent on monthly mortgage payments rose from 27.7% in February to 37.3% in October, well above a previous high of 35% in 2006. Housing payments are considered a burden financial when they exceed 30% of a household’s income. Income.
The monthly mortgage payment on buying a typical US home, even with a 20% down payment, was $1,910 in October. That’s a 77% jump year-over-year and a 107% increase — nearly $1,000 — over 2019. The monthly payment numbers are even higher when including taxes and insurance. and paying less than 20%, as more than half of borrowers do.
Affordability issues are weighing heavily on sales. The sales tally, now forecast for the most recent month due to latency, shows a significant slowdown in recent months and is between 16% and 17% below pre-pandemic October norms.
While it’s tempting to focus on buyers, affordability changes related to mortgage rates are having a huge impact on sellers’ behavior, keeping more existing homes off the market. While first-time buyers have also come under continued pressure on rents, landlords who bought or refinanced when rates were near record lows in 2020 and 2021 are sitting on substantial value gains and have little incentive to take out a new home loan, deciding instead to take advantage of their current monthly payment.
At this point, the number of new listings for sale has fallen more than 12% month-over-month, bringing the flow of listings into the market 24% lower than in 2021 and 21 % below 2019. The steepest declines in new listings from September came in Seattle (-28.5%), Denver (-26%) and Washington, DC (-24.2%). New inventory rose month-over-month in two major metros — Jacksonville (3.1%) and Tampa (1.3%) — while the smallest declines were in other Florida cities and in relatively affordable Midwestern metros.
The drastic decline in new listings stalled the recovery in total inventory that began in March. There are slightly more (1.8%) listings for sale on Zillow than a year ago, but still significantly fewer (-36.1%) than in October 2019.
With supply and demand drying up, US home values have held steady, rising 0.1% since September, marking the fourth consecutive month of muted movement. Typical home values are $358,458, up nearly 12% from 2021 and 43% higher than before the pandemic. The top metropolises with the greatest home value appreciation since 2019 are Tampa (72%), Austin (64%), Jacksonville (62%) and Phoenix (60%).
Some expensive Western markets, including Los Angeles (+0.8%) and Riverside (+0.4%), abruptly halted steep impairment streaks; time will tell if September marked the bottom of price declines in these cities. Las Vegas (-2.3%) and Austin (-2.2%) saw the largest declines in home values among major metropolitan areas.
The rent index observed by Zillow posted a slight decline of 0.1% from September to October, ending a two-year streak of rent growth. The drop is a small step toward normality, reminiscent of October declines seen from 2017 to 2020. Typical U.S. rent is now $2,040, up 9.6% from last October and nearly 27% since 2019.
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