California has seen the largest shift toward buyers
Market conditions in 20 of the 35 largest metros favor buyers more than they did last year, according to the Zillow Buyer-Seller Index.
To know whether the market is cooler (favoring buyers) or hotter (favoring sellers), the index compared each metro across time and determined the share of listings with a price cut, the time it takes to sell a home, and the ratio of the sale-to-list price.
California markets saw the largest shift towards buyers since January, with San Francisco seeing the most significant swing. Four of the top five markets for buyers are in the West, including San Francisco, San Diego, Los Angeles, and Denver.
San Jose and San Francisco remained the hottest markets compared to other markets around the US even though they have cooled down greatly. Home prices in these two Bay Area markets stayed restrictive; in both markets, a prospective buyer must pony up a down payment of more than 20% to keep mortgage payments at or below 30% of monthly household income.
"It is no surprise that the markets which pushed the bounds of affordability over the housing recovery are now experiencing significant cooling," said Skylar Olsen, director of economic research at Zillow. "As down payments and mortgage payments far outpaced incomes, buyer demand eventually exhausted itself. Those buyers looking in cooling markets will likely welcome the relief, although the entry price is still high. Inventory is returning and spending more time on [the] market, meaning their decision making can be made with a cooler head."
Not all hot markets cooled down over the past year; some became more seller-friendly, according to the report. Miami, which is not a stranger to big fluctuations, saw the biggest shift toward sellers over the past year. Homes sold about a week faster than they did last year.
