Interest rate volatility and its growing impact on affordability are reducing competition among buyers and contributing to a second straight monthly decline in home prices, Zillow said.
Home prices fell 0.3% in August from July to $356,054, according to Zillow’s raw home value index. This is the biggest monthly drop since 2011. It followed a 0.1% decline in July.
“Significant daily and weekly rate movement This means that many potential buyers may qualify for credit one week but not the next, or vice versa,” Skylar Olsen, chief economist at Zillow, said in a press release. “Even buyers who can afford a home at current rates may feel frozen expecting mortgage rates to fall sharply again, as they did from late June to mid-July when rates fell 50 basis points in just two weeks. “.
Typical home values are still up 14.1% from August 2021 and 43.8% from August 2019. High annual growth rates can be masking deeper problems in the market, noted Black Knight earlier this month.
Remax previously reported that prices were down 2.4% m/m but rose 7% y/y. However, these lower prices have led to sales growth of 5.3% in August against July.
The typical turnaround time for an ad to sell pending was 16 days in August. up to 3 days from July. That’s a sharper rise than the market typically sees at this time of year, Zillow said in a report.
While inventories were up 1% from July — the smallest jump since February — it was more the result of homes taking longer to sell, Zillow said. Potential sellers do not act because interest rates are in the 6% range.
A separate report by Redfin noted a seasonally adjusted 8 percent decline in new home listings in August compared to July. This is the lowest level since May 2020, when the housing market ground to a halt in the early days of the pandemic.
When rates were below 3%, “the market was like a game of musical chairs with buyers vying for too few homes,” Redfin chief economist Daryl Fairweather said in a press release. “Now the market is more like a high school dance, where a small number of buyers and sellers pair up during a slow song.”
The average number of days on the market in August, according to Redfin, was 26, which is 5 more than in July and 9 more than a year ago.
There were only two months of inventory in the market in August, slightly less than in July.
The median selling price is down 1.3% from July to $406,900; this is 7.1% higher than in August 2021.
This decline in sales is not a sign that the bubble has burst, primarily because homeowners don’t have to sell because they pay low mortgage rates and still have large stakes in their property, Fairweather argues.
“The job market remains very strong, so there is little risk that mortgage delinquencies or foreclosures will rise significantly,” Fairweather said. “It will take a severe recession, not a mild one, to put homeowners in distress.”
Meanwhile, low-cost housing markets remain hot, Zillow said. Home values rose in 12 of the top 50 markets on a monthly basis, led by Birmingham, Alabama, up 0.9%; Indianapolis, up to 0.5%; Cincinnati, up to 0.4%; and Louisville, Kentucky, up 0.2%, all areas where the typical home value is under $300,000.
Miami, which ranked fifth in terms of growth, also posted the highest rent growth in three years.
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