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A surge in new home listings in May could point to a cooling housing market. For people who have been patiently waiting for the market to improve before buying a home, now might be the time to start looking.
New listings climbed 8% from April to May, 13% higher than last year’s lows, according to Zillow’s latest market report published Wednesday. The larger-than-average seller-side increase suggests that the “lock-in effect,” where homeowners stay put in their existing homes and mortgages, is showing signs of easing.
“Rate lock’s hold seems to be loosening — homeowners who may have put off listing their homes are done waiting,” said Zillow senior economist Orphe Divounguy.
But just as sellers began to create more inventory and choices, potential buyers “turned on cruise control,” Divounguy said. Home sales fell 6% in May compared with last year, the online real-estate marketplace found.
The difference between sellers’ enthusiasm and buyers’ tepid response is a net positive for the housing market, however, particularly when it comes to inventory. The number of homes on the market grew 22% compared with last year’s near-record lows, shrinking the deficit to its lowest in more than three years (although inventory still sits 34% below pre-pandemic levels).
The result?
The rise in home prices slowed, competition cooled, and the market is becoming friendlier for homebuyers and heading towards neutrality between buyers and sellers, Zillow said.
Nearly 25% of homes for sale across the country saw a price cut in May — the largest share in the past six years for this time of year. And Zillow said buyers still have a shot at purchasing a property for less than its list price.
A record 86% of consumers say it’s a bad time to buy a home as high mortgage rates and soaring home prices have kept the housing market largely unaffordable, especially for first-time buyers, the latest monthly Fannie Mae home purchase sentiment survey found.
The median price of a home in the U.S. is $432,812, up 6% from a year ago, according to residential real-estate firm Redfin. Paired with inflation, which has become a top concern affecting personal finances for all Americans, the prospect of buying a home has felt increasingly out of reach.
Zillow’s Divounguy said, however, that current market activity could be a sign of better times (and possibly falling prices) ahead.
“Inflation has hit younger households hardest, and stubbornly high rates have pushed a mortgage out of reach for many first-time buyers. That has cooled competition for houses,” he said. “If these trends hold, we’re likely to see price growth flatten or tick down over the next year.”