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Home Values Falling in Most of the U.S.

Despite mortgage rates reaching 23-year highs, low inventory levels are spurring surprisingly strong competition, according to Zillow's latest market report. Depleted inventory stocks are gradually recovering, and price appreciation is slowing, but demand has remained resilient, and attractive, appropriately priced listings are moving quickly.

"With mortgage rates nearing 8% in October, the U.S. housing market continues to turn cooler, with inventory rising, and appreciation decelerating. As interest rates rose, some pent-up sellers appear to have been shaken free of waiting for rates to drop. New listings have nearly escaped the red annually and are trending out of a mortgage rate lock-induced hole," said Skylar Olsen, Zillow Chief Economist. "A record number of households in prime home-buying ages are providing buyers, despite the headwinds."

Key Findings:

  • Home values fell in October in most large markets, led by Austin (-1.5%), Minneapolis (-1%), and New Orleans (-1%).
  • Home values continue to rise month over month in only 10 of the 50 largest U.S. metro areas. Miami leads the way (+0.5%), followed by San Jose (+0.4%) and San Diego (+0.2%).
  • On an annual basis, home values are up in 34 of the 50 largest markets. That’s up from 32 markets that had seen annual home value gains as of September.
  • Home values are up the most since last October in Hartford (+11.4%), Milwaukee (+8.5%), Providence (+7%), and Boston (+6.8%).
  • Austin (-9.2%) and New Orleans (-9%) have seen the biggest home value drops over the past year.

The key number for any potential buyer or seller is the mortgage rate, which marched skyward through October and finished the month near 8%. Rate hikes pushed monthly payments on a typical U.S. home up by more than 4% from September to October. At $1,991, monthly payments are up almost 10% compared to last October and have nearly doubled in two years.

Total U.S. inventory levels.

The Zillow Home Value Index puts the typical U.S. home value at $347,972, up 2.3% from last year. A 0.3% monthly decline in values in October is a tad steeper than the 0.1% dip from August to September and shows a slightly faster deceleration than pre-pandemic norms.

Home values fell in October in 40 of the top 50 markets, with the largest declines in Austin (-1.5%), Minneapolis (-1%), and New Orleans (-1%). The largest monthly growth was in sunny (and costly) Miami (0.5%), San Jose (0.4%), and San Diego (0.2%).

Annual appreciation is strongest in Hartford (11.4%), Milwaukee (8.5%), Providence (7%), and Boston (6.8%), all metros that avoided extreme early-pandemic growth spurts.

Inventory is still depleted, but it is slowly recovering.

New listings fell nearly 5% from September, a smaller drop than would be expected seasonally. But levels were still the lowest to hit the market in any October recorded by Zillow since 2018.

Despite this, the longstanding deficit in new listings is generally shrinking as some sellers accept that high rates are sticking around. A shortfall of only 1.2% from the year prior is the smallest since May 2022, and a deficit of 19% compared to pre-pandemic levels is much improved from a trough of -35% in April.

There were still a massive 39% fewer homes for sale in October than pre-pandemic norms, but that's an improvement over the 46% deficit in May. Total inventory climbed 2.6% nationally from September to October—a result of fewer sales and an unexpectedly small September dropoff in new listings.

As sellers come to grips with higher-for-longer mortgage rate expectations, "rate lock" is likely to ease a bit and encourage sales—about 70% of sellers turn around and buy. Seasonally adjusted sales counts, down 31% in July from normal levels, are now improved to down 26% in October.

Competition is easing but remains tight for attractive listings.

Rising rates and recovering inventory translate to fewer buyers in bidding wars and more sellers cutting list prices. In October, 25.2% of sellers cut their list price, up from 23.9% in September. The share of sales that closed higher than the list price fell from almost 37% in August to 34% in September, but that's still well above pre-pandemic norms of the low- to mid-20s.

Overall, attractive listings are still moving fast. Listings that sold in October typically did so in 16 days—one day longer than in September, but two days faster than last year and two weeks faster than in 2019.

Total inventory is climbing, likely a result of fewer sales taking homes off of the market.

  • Despite fewer homes newly listed for sale, total inventory climbed 2.6% nationally.
  • Newly pending sales fell 3.3% from September to October.
  • Inventory rose month over month in 42 of the 50 largest markets, none more so than Phoenix (+9%), Miami (+8.5%) and Tampa (+8.3%).
  • Inventory fell the most from October in Seattle (-6.6%), Portland (-3.1%), Austin (-2.4%) and San Jose (-1.6%).
  • Sales activity is rising fastest in Memphis (+9.4% month over month), Atlanta (+5.8%) and the New York City metro area (+5.3%).
  • Sales slowed the most in New Orleans (-14% month over month), Seattle (-12.1%) and Sacramento (-11.8%).

To read the full report, including more data, charts, and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].
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