Elevated home prices and mortgage rates have hammered the housing market in recent months, but here’s news that may signal better times ahead.
The Zillow Home Value Index dipped 0.1% in July from June, the first decline since 2012, with home prices falling in 30 of the 50 largest metro areas.
The typical home value now stands at $357,107, down from $357,473 in June. The decline came as part of a gradual trend, with home-value growth slowing in May and June.
The largest July home-value declines came in San Jose (4.5%) and San Francisco (2.8%), the nation’s most expensive major markets. Then came Phoenix (2.8%) and Austin (2.7%), which rose the most during the pandemic. Apparently, what goes up must come down.
Zillow Says Don't Get too Excited
But don’t get too excited, Zillow says. “While the recent decline in prices is a notable development, the housing market is still far from a return to normal conditions,” it said in a report with the data.
“The current slowdown is prompted by the collision of extreme price growth during the early- and mid-pandemic with the sudden increase in mortgage rates since December.”
That’s “a combination that swiftly weakened would-be homebuyers’ ability to afford or qualify to purchase their next house,” Zillow said. “The typical home value is still up 16% year over year and 44.5% since July 2019.”
If you add higher prices with rising mortgage rates, the typical mortgage payment has risen by more than 60% in just the last year, Zillow said.
But on the bright side, “while high prices plus higher mortgage rates have pushed some buyers from the market for now, those shoppers who are able to proceed suddenly face a much less competitive market,” Zillow said.
That gives prospective home buyers “more time to conduct their search and more options to consider.”
Rising Inventories – For Now
Another boost for buyers: inventories are rising. The number of active for-sale listings climbed 5.1% in July from June, the fifth straight monthly increase.
But the outlook going forward isn’t so positive for inventories. Housing starts dropped 9.6% in July from June, and new for-sale listings of existing homes fell 13.6% in July from June.
In other bad news for the housing market, new home sales slid 12.6% in July to the slowest pace since early 2016, according to the Census Bureau.
The median sales price of a new home was up 8.2% from a year earlier to $439,400, the slowest pace of price appreciation since late 2020. The price also increased 5.6% from $414,900 in June.
Looking broadly, “the housing market is correcting for extreme pressure during the pandemic,” Zillow said. “However, … as the slowdown continues to progress and competition and price pressures ease, enough buyers will be ready to move forward and turn the market back toward hopefully healthier price growth.”
So we’re left with a pretty mixed picture. If you’re a prospective homebuyer you might consider waiting until things shake out a bit more, and prices hopefully decline.
