The number of homes for sale increased in July increased by 25% year over year
After months of a sellers’ market, the US housing landscape shifted to a more balanced state in July, according to Zillow’s latest market report.
The Zillow Market Heat Index, which tracks the balance between home supply and demand, revealed a neutral market for the first time this year, indicating a shift in favour of buyers.
In July, homes that sold took an average of 18 days to go pending, marking a six-day increase from the previous year. This slowdown reflects a decrease in buyer urgency amid persistent high housing costs. However, the recent drop in mortgage rates could potentially revive market activity and competition.
Zillow chief economist Skylar Olsen noted, “If this relief from mortgage rates continues, we should see more buyers restarting their hunt for a home.” Olsen added that while rate locks among homeowners are easing, they may not be as motivated to sell, given the still-low inventory. This could lead to increased competition and sales as the market heads into the fall season.
The shift in market dynamics is evident across various major cities. For the first time since December, the national market is classified as neutral. Notably, cities such as Denver, Pittsburgh, Indianapolis, and Louisville have transitioned to neutral markets, while Orlando and other large Florida metros have become more favourable to buyers.
Increase in activity
In July, the number of homes for sale increased by nearly 25% compared to the previous year, marking the eighth consecutive month of rising inventory. Despite this, inventory remains about 31.5% lower than pre-pandemic levels. To attract buyers, sellers have been cutting prices at unprecedented rates, with over 26% of homes experiencing price reductions—the highest share for any July since 2018.
Recent changes in mortgage rates have begun to impact affordability. By the end of July, the monthly cost to purchase a home compared to renting fell below $200, down from a $247 difference in April. Lower mortgage rates are expected to further narrow this gap, potentially encouraging more buyers to re-enter the market.
Despite these changes, current homeowners are unlikely to flood the market with new listings, the report noted. Zillow surveys indicate that major life events, such as changes in household size or work situation, often drive homeowners to sell. Typically, new listings surge in the spring but decrease as summer ends and the school year begins.
Home value appreciation has slowed to a modest 2.8% year over year as of July. This trend may reverse if increased buyer demand outpaces supply growth.
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