The US housing market, which has been experiencing record-high prices and low inventory for months, may be cooling down this fall, creating a rare opportunity for buyers, according to a report by Zillow. The real estate listings site said that more sellers are cutting prices on their listings, and more homes are coming on the market, giving buyers more choices and bargaining power.
Price Cuts on Listings Reach Highest Level Since November
Zillow said that 9.2% of home listings saw a price cut in the week ending September 16, the highest share since November 2020. This is higher than the 7.9% rate for the same period in 2019, and indicates that sellers are adjusting their expectations in response to weaker demand and higher mortgage rates.
The average 30-year fixed mortgage rate hit a 23-year high of 7.31% last week, according to Freddie Mac data, making home buying more expensive and less affordable for many buyers. Zillow senior economist Jeff Tucker said that the high rate of price cuts either means that buyers have pulled back, sellers have overreached with too-high list prices, or some combination of both.
More Homes Are Being Listed on the Market, Easing the Inventory Shortage
Another sign that the housing market is starting to cool down is the increase in new listings in August, compared to July. Zillow said that this was “unusual”, as the number of listings has been falling since July 2020, and could mean that the worst of the “listings drought” may be over.
New listings rose by 4% month-over-month in August, adding more inventory to the market and giving buyers more options to choose from. Zillow said that there are more motivated sellers and more active listings overall than any time since last December, improving buyers’ chance to find the right fit.
Fall Could Be a ‘Sweet Spot’ for Buyers with Enough Budget Room
Zillow said that for determined buyers, with enough budget room to accommodate the recent jump in mortgage rates, this fall could be a “sweet spot” in the market. They may be able to take advantage of the price cuts, the increased inventory, and the seasonal slowdown in the market, which typically sees less competition and more flexibility from sellers.
However, Zillow also warned that buyers still face significant challenges, as home prices remain high and affordability conditions are unlikely to improve significantly until mortgage rates dial back, which may not happen anytime soon. Zillow economists previously forecasted that home prices will continue to increase through the first half of 2024, despite the current cooldown.
