Sellers lose their advantage, but lower rates may revive housing market competition

Larisa Menjivar August 16, 2024

3 7 minutes read

Home shoppers held up by high costs could restart their search in the shoulder season

Zillow’s market heat index shows the market moved into neutral, more balanced territory in July — the first time this year that it’s been anything other than a sellers’ market.
Competition for homes eased — homes that sold went pending in 18 days, six more days than last year.
An early August drop in mortgage rates should bring in more new buyers than sellers, reviving competition.

, /PRNewswire/ — Competition for homes and price appreciation tapered off faster than normal in July as high housing costs continued to stymie shoppers, according to the Zillow® market report.¹ But recent drops in mortgage rates should spur more competition as we head into fall.

“If this relief from mortgage rates continues, we should see more buyers restarting their hunt for a home,” said Zillow Chief Economist Skylar Olsen. “But although rate lock among homeowners is easing, they probably won’t be as motivated to jump back into the market and sell. With housing inventory still scarce, this improved affordability picture could reignite competition and sales as we head into the fall, or at least delay the usual post-summer cooldown.”

Sellers lose the upper hand
Sellers gave up a marked advantage over buyers in July on the national scale, as the Zillow market heat index² moved into neutral territory for the first time since December. This marks the first July the national market has been neutral since 2019; in each of the past two years, the market moved into neutral ground in October.

Among major markets, Denver, Pittsburgh, Indianapolis and Louisville lost their advantage for sellers and moved into neutral territory, while Orlando became buyer-friendly like the rest of the big Florida metros.

Homes are lingering on the market — even successful listings took almost a week longer to sell in July than last year. While that’s still five days faster than the average pace of sales in the years before the pandemic, it’s still a sign that buyers were much less eager to commit.

Inventory accumulated further in July, and now stands nearly 25% above last year’s levels, marking the eighth straight month the year-over-year inventory gap has widened. Compared to pre-pandemic norms, the inventory shortfall shrank a bit and is now down 31.5%, the smallest deficit since October 2020.

In an effort to win over cash-strapped buyers, home sellers again cut prices at record levels. More than 26% of homes on Zillow received a price cut in July, the highest share for any July since at least 2018, when the dataset began.

What happens next?

This cooling competition and pricing slowdown could dissipate in August if lower mortgage rates hold.

By the end of July, lower rates brought the monthly price premium to buy a home, rather than rent a similar property, below $200.³ That has shrunk from a $247 difference as recently as April. Now lower rates in August are closing the gap even further.

Of course, the cost disparity between renting and buying differs in every metro and even by neighborhood. But for those shoppers on the edge of affordability — and who have enough cash on hand for a down payment — the significant drop in rates may offer enough relief to entice a move. The effect of a rate cut on mortgage payments is more significant in expensive areas.

Lower rates aren’t likely to encourage a comparable wave of current homeowners to sell, though. Zillow surveys show 80% of recent sellers were influenced by major life events, such as a change in their household size or working situation. New listings typically surge in spring and then taper off as homeowners aim to sell, buy another house, and be moved in before school and the fall holidays begin.

Home value appreciation slowed to a refreshingly reasonable 2.8% year over year in July, but that could tick back up if the surge in demand outweighs an increase in supply, as expected.

Metropolitan Area*	July Zillow Home Value Index (ZHVI) (Raw)	ZHVI Change, Month over Month (MoM)	ZHVI Change Since Before the Pandemic	Market Favors**	Share of Listings With a Price Cut	Inventory Change Since Before the Pandemic	Typical Mortgage Payment***
United States	$362,156	0.3 %	46.6 %	Neutral	26.3 %	-31.5 %	$1,900
New York, NY	$675,044	0.9 %	34.1 %	Strong seller	14.4 %	-52.6 %	$3,522
Los Angeles, CA	$967,944	0.3 %	43.8 %	Seller	20.7 %	-32.6 %	$5,029
Chicago, IL	$328,239	0.7 %	38.1 %	Seller	25.4 %	-51.7 %	$1,718
Dallas, TX	$378,091	-0.1 %	46.9 %	Neutral	37.5 %	-11.3 %	$1,985
Houston, TX	$310,998	0.1 %	39.2 %	Neutral	28.8 %	-17.3 %	$1,632
Washington, DC	$568,111	0.0 %	31.1 %	Strong seller	23.2 %	-44.6 %	$2,975
Philadelphia, PA	$365,874	0.4 %	45.5 %	Seller	22.9 %	-49.8 %	$1,918
Miami, FL	$492,157	0.2 %	62.4 %	Buyer	23.2 %	-13.9 %	$2,580
Atlanta, GA	$387,104	0.1 %	57.0 %	Neutral	31.9 %	-16.8 %	$2,031
Boston, MA	$706,598	0.5 %	44.4 %	Strong seller	19.6 %	-42.1 %	$3,697
Phoenix, AZ	$457,842	-0.3 %	52.4 %	Neutral	34.3 %	-23.1 %	$2,406
San Francisco, CA	$1,178,102	-0.2 %	25.3 %	Strong seller	19.7 %	-5.6 %	$6,157
Riverside, CA	$588,097	0.3 %	53.3 %	Seller	23.5 %	-33.8 %	$3,075
Detroit, MI	$255,620	0.4 %	42.3 %	Seller	24.6 %	-40.1 %	$1,342
Seattle, WA	$747,883	-0.1 %	45.0 %	Seller	28.7 %	-26.2 %	$3,913
Minneapolis, MN	$377,229	0.2 %	28.3 %	Strong seller	26.5 %	-37.4 %	$1,983
San Diego, CA	$953,488	-0.2 %	56.8 %	Seller	27.9 %	-39.2 %	$4,994
Tampa, FL	$380,626	-0.1 %	61.6 %	Buyer	32.7 %	29.0 %	$2,003
Denver, CO	$590,525	-0.1 %	35.9 %	Neutral	38.2 %	-3.8 %	$3,092
Baltimore, MD	$387,557	0.1 %	31.9 %	Seller	25.7 %	-50.7 %	$2,037
St. Louis, MO	$255,516	0.4 %	42.2 %	Strong seller	23.0 %	-48.6 %	$1,337
Orlando, FL	$399,690	0.2 %	55.0 %	Buyer	29.1 %	25.3 %	$2,097
Charlotte, NC	$385,392	0.1 %	59.8 %	Neutral	28.0 %	-6.8 %	$2,024
San Antonio, TX	$287,892	-0.1 %	34.7 %	Neutral	34.5 %	10.8 %	$1,514
Portland, OR	$553,363	0.1 %	32.8 %	Seller	30.5 %	-24.9 %	$2,899
Sacramento, CA	$587,238	0.2 %	35.1 %	Seller	28.5 %	-34.7 %	$3,077
Pittsburgh, PA	$215,714	-0.2 %	34.9 %	Neutral	28.7 %	-43.9 %	$1,136
Cincinnati, OH	$289,362	0.5 %	49.7 %	Seller	29.1 %	-42.1 %	$1,514
Austin, TX	$459,270	-0.4 %	41.7 %	Buyer	32.6 %	33.9 %	$2,415
Las Vegas, NV	$434,569	0.6 %	46.1 %	Seller	27.2 %	-32.6 %	$2,269
Kansas City, MO	$307,836	0.3 %	47.3 %	Seller	29.6 %	-45.7 %	$1,612
Columbus, OH	$316,724	0.4 %	51.4 %	Seller	31.7 %	-31.3 %	$1,660
Indianapolis, IN	$283,298	0.3 %	52.2 %	Neutral	33.1 %	-24.3 %	$1,486
Cleveland, OH	$234,178	0.8 %	49.8 %	Strong seller	23.5 %	-58.6 %	$1,224
San Jose, CA	$1,613,123	-0.4 %	42.0 %	Strong seller	17.3 %	-24.5 %	$8,317
Nashville, TN	$444,811	0.1 %	49.3 %	Neutral	36.8 %	-15.1 %	$2,335
Virginia Beach, VA	$353,704	0.3 %	42.4 %	Seller	24.4 %	-51.2 %	$1,851
Providence, RI	$492,405	1.0 %	55.1 %	Strong seller	19.7 %	-61.0 %	$2,568
Jacksonville, FL	$360,340	0.0 %	52.5 %	Buyer	33.2 %	4.6 %	$1,896
Milwaukee, WI	$351,105	0.5 %	44.9 %	Seller	16.4 %	-32.6 %	$1,841
Oklahoma City, OK	$236,885	0.2 %	43.8 %	Neutral	31.2 %	-17.7 %	$1,243
Raleigh, NC	$446,704	0.0 %	53.8 %	Seller	36.0 %	-21.4 %	$2,345
Memphis, TN	$241,340	-0.1 %	46.9 %	Buyer	29.4 %	1.6 %	$1,269
Richmond, VA	$373,333	0.3 %	48.5 %	Strong seller	25.4 %	-45.9 %	$1,956
Louisville, KY	$261,246	0.5 %	38.7 %	Neutral	28.9 %	-34.0 %	$1,367
New Orleans, LA	$245,134	0.4 %	5.3 %	Buyer	26.4 %	38.3 %	$1,293
Salt Lake City, UT	$545,852	-0.1 %	46.4 %	Seller	33.3 %	-20.1 %	$2,864
Hartford, CT	$368,351	0.9 %	59.7 %	Strong seller	16.5 %	-67.2 %	$1,927
Buffalo, NY	$267,020	0.9 %	55.2 %	Strong seller	19.7 %	-43.7 %	$1,400
Birmingham, AL	$254,613	0.1 %	38.2 %	Neutral	26.0 %	-27.5 %	$1,339

*Table ordered by market size

**According to Zillow’s market heat index

*** Mortgage payment, excluding taxes and insurance, for a house valued at the Zillow Home Value Index for that location, bought at the average mortgage rate for July (6.85%), using a 20% down payment.

¹ The Zillow® Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Research. For more information, visit www.zillow.com/research.

²The Zillow market heat index aims to capture the balance of for-sale demand and supply in a given market, or in this case, on a national scale.

³Pitting the monthly mortgage payment for a typical home, priced at the Zillow Home Value Index, using a 20% down payment, and weekly mortgage rate averages against the Zillow Observed Rent Index.

About Zillow Group:
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SOURCE Zillow