Expensive Coastal Markets Heating Up as Spring Approaches

This spring’s home shopping season will be competitive, according to Zillow’s latest market report, meaning both buyers and sellers should prepare for potential bidding wars. The report showed that affordable homes are selling quickly and that the asking prices of those that remain on the market are being lowered.

“Some of the homes loitering on the market may just need the right buyer and digital curb appeal to cast a wider net, but many may be overpriced. There are slightly more homes for sale than this time last year, and there is still plenty of competition for well-priced houses,” said Skylar Olsen, Zillow Chief Economist.

Home Values

This month, the typical home in the US was $344,159, while the typical monthly mortgage payment—assuming 20% down—was $1,760.

  • Home values are up from year-ago levels in 47 of the 50 largest metro areas. Annual price gains are highest in Hartford (12.2%), San Diego (9.6%), Providence (8.3%), Boston (8%), and Los Angeles (7.4%).
  • Home values are down from year-ago levels in three major metro areas. The drops were in New Orleans (-8.2%), Austin (-6.2%), and San Antonio (-3.2%). The least growth was in Jacksonville, FL (0.4%) and Dallas (0.5%).
  • Home values climbed month-over-month in 4 of the 50 largest metro areas in January. Gains were biggest in Riverside (0.2%), San Diego (0.1%), New York (0.1%), Las Vegas (0.1%), and Miami (0%).
  • Home values fell on a monthly basis, in 45 major metro areas. The largest monthly drops were in New Orleans (-1.1%), Minneapolis (-0.8%), Buffalo (-0.7%), Cleveland (-0.7%), and Pittsburgh (-0.6%).
  • The typical mortgage payment is up 7.2% from last year and has increased by 103.1% since pre-pandemic.

What trends are homebuyers are seeing in 2024’s market?

January experienced price drops for slightly more than 1 in 5 Zillow homes, approximately the same as the previous year but more frequent than any of the five years prior. The average sold home stayed on the market for 29 days before going pending, but other homes lingered on the market for months, increasing the average age of listings on Zillow to 72 days. 

These decreases are putting seller expectations more in line with the current market conditions.

New Listings

  • New listings increased by 43.5% month-over-month in January. But even that massive jump up is relatively small compared to pre-pandemic January norms; new listings rose 66% monthly in 2019 and 63.4% in 2020.
  • New listings are up by 5.8% compared to last year.
  • New listings are -24.9% lower than pre-pandemic levels. The pandemic-era shortfall in new listings has lessened compared to the 35% deficit in April, but gains made late last year have been lost.
  • Metros where sellers are showing up much stronger than last year are San Diego, where new listings are up 27.7% annually, Miami (21.9%), and Riverside (20.1%).

Buyers who are now taking virtual and in-person tours may be able to work out an affordable price on a home that has been waiting for them. In places where the median time on market for sold properties has decreased the most since last year, however, that is probably not the case in Las Vegas (down 32 days), Phoenix (30), and Seattle (28).

So, where are the “deals” plentiful, and where are they diminishing? In affluent Western metros like Seattle, Las Vegas, Austin, and San Jose, price drops are far less frequent than they were a year ago.

Markets in Florida, Texas, and Phoenix are where price reductions are most common. These are regions with either very minor inventory drops or overall inventories that are larger than they were prior to the epidemic, including Austin and San Antonio.

Compared to previous year, there are a few more options available now. While the number of new listings coming onto the market has increased by almost 6%, the overall inventory is up more than 3% from a year ago. New inventory usually increases significantly in January compared to December; this year, the monthly increase was 43%. 

Unfortunately, that was only a slight improvement, consistent with Januarys that haven’t been very strong over the previous few years.

What trends are home sellers are seeing in 2024’s market?

According to the report, sellers continue to enjoy record-high home equity. At $344,159, the average home value in the U.S. has increased by about $100,000 since 2020. Only three of the 50 largest U.S. metro areas saw a decline in home values over the course of the year, and the country’s annual appreciation rate of 3.6% is generally healthy.

According to the most current data available, almost 25% of homes sold for more than the asking price in December. That’s less than the rate-driven early pandemic real estate frenzy, but it’s still somewhat higher than December 2022 and far higher than the pre-pandemic period, when less than 20% of properties sold for more than list price.

San Diego, where new listings are up 28% yearly, Miami (22%), and Riverside (20%) are metro areas where sellers are coming up stronger than they did a year ago.

What can buyers and sellers expect in coming months?

All the above suggests that the current home buying season is rather competitive and that desirable properties are going quickly. Large numbers of millennials and baby boomers are searching for homes due to demographic trends and a generally robust economy, even though affordability is still quite difficult to come by.

Buyer and Sellers to Face Competition in 2024

Attractive listings are moving quickly—listings that sold in January did so in 29 days. That’s slower than during the rush for real estate while mortgage rates were low, but 19 days faster than pre-pandemic norms.

Listings that are overpriced or poorly prepared, however, continue to linger on the market. In an effort to meet buyers where they are, sellers are lowering their prices. At 20.9% of postings, price reductions are comparatively common; while they are slightly less frequent than in the previous year, they are still more frequent than in any of the five years before that.

In December, about 26.4% of properties sold for more than they were listed for. It is an increase of 2.5 percentage points over the previous year and 8 percentage points from the pre-pandemic averages. San Jose (33.8%), San Francisco (14.3%), and Los Angeles (14.3%) had the largest yearly growth rates.

Newly pending listings increased by 25.5% in January from the prior month and decreased by 3.8% from last year.

Renting Remains an Option for Buyers and Sellers

According to the report, the typical U.S. rent sits at $1,958. The annual increase in rent has remained steady at 3.4%, essentially unchanged since August. The Great Lakes, Midwest, and Northeast metro areas have the largest annual rent growth. The top three are the same as those observed in December: Providence (7.7%), Cincinnati (7.1%), and Hartford (7.0%).

“Buyers should prep their credit scores and sellers should prep their properties now—attractive listings are going pending in less than a month, and time on market will shrink in the weeks ahead,” said Olsen.

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

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Demetria C. Lester

Demetria C. Lester is a reporter for MortgagePoint (formerly DS News and MReport) with more than eight years of writing and editing 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, Lester is a jazz aficionado, Harry Potter fanatic, and avid record collector. She can be reached at demetria.lester@thefivestar.com.
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