Zillow’s February 2024 Market Report has found that new listings have risen 21% annually, as homeowners are beginning to join a once-again competitive housing market.
This infusion of new inventory into the market is welcome news for buyers on the hunt for their next home, and is more evidence that the effects of “rate lock” on homeowners are starting to weaken.
“For more than a year, Zillow homeowner surveys have shown an elevated share of homeowners expecting to sell in the next three years. We’re finally beginning to see owners who have been putting off moves return to the market,” said Skylar Olsen, Chief Economist at Zillow. “For many households with record-high equity, waiting out potentially lower rates later in the year may not be worth it.”
Buyer options on the rise
Buyers are seeing more choices on the market, which should help spur home sales for the spring 2024 season. New listings of existing homes on Zillow were up 21% in February compared to last year, and rose 20% month-over-month from January 2024. The increase in new listings was nationwide, as counts were up annually in each of the nation’s 50 largest metros. Some of the largest increases were found in the in the South, especially Texas and Florida, as new construction in these areas is providing existing homeowners with new options and freeing up existing inventory.
Total inventory was rising as well, up 12% nationally compared to last year. At just more than 900,000, there were more homes for sale in February 2024 than in any February since 2020. Annual increases were reported the highest in Dallas, where the total was up 39%; in Tampa with a 31% increase; Orlando, with a 30% rise; and in Miami with a 29% rise.
Closing deals quicker
Despite February’s boost in housing supply, competition for these new listings remains strong, as homes that went under contract in February typically did so after 17 days—that’s slower than during the rate-fueled frenzy of 2021 and 2022, but far faster than before the pandemic. The average time on Zillow for all homes was 53 days, which is longer than normal for this time of year.
Zillow reported that price cuts were more common than normal, with one in five listings on its Zillow Marketplace seeing cuts, as sellers have brought their expectations closer to where buyers can meet them. Most sellers will have plenty of cushion to absorb a price cut and come out ahead from when they bought their home. Typical home values were up from last year in all but three major metros, and values have risen 41% nationwide since before the pandemic.
Mortgage rates begin to ease
According to the Zillow Home Value Index the typical home in the U.S. was worth $349,216 in February 2024—up 40.8% compared to prices measured before the pandemic. Monthly gains were largest in the more expensive coastal metros of San Jose (1.6%), San Diego (1.3%), Seattle (1.2%), San Francisco (0.8%), and Washington, D.C. (0.8%).
Mortgage rates also rose in February pushing close to the 7%-mark, a factor which helped bump the cost of a mortgage on a typical home 9.4% higher than last year. Freddie Mac reports that the 30-year fixed-rate mortgage (FRM) averaged 6.74% as of March 14, 2024, down from the previous week when it averaged 6.88%. A year ago at this time, the 30-year FRM averaged 6.60%.
Sam Khater, Freddie Mac’s Chief Economist, noted, “Despite the recent dip, mortgage rates remain high as the market contends with the pressure of sticky inflation. In this environment, there is a good possibility that rates will stay higher for a longer period of time.”
The Mortgage Bankers Association (MBA) reports positive strides in mortgage application volume to kick off the spring buying season, with mortgage application volume increasing 7.1% from one week earlier, according to the latest MBA’s Weekly Mortgage Applications Survey for the week ending March 8, 2024.
“Mortgage rates declined significantly last week, with the 30-year fixed mortgage rate dropping below 7% for the first time since early February,” said MBA President and CEO Robert D. Broeksmit, CMB. “The decline in rates led to a solid gain in mortgage applications for the second consecutive week. With the spring homebuying season underway, lower mortgage rates and more new and existing housing supply should boost mortgage demand.”
Mike Fratantoni, MBA’s SVP and Chief Economist, added, “Purchase application volume increased for the week, but remains about 11% below last year’s level. By contrast, refinance volume picked up by 12%, with a larger, 24% increase in the government refinance index. While these percentage increases are large, the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years.”
Resorting to new tactics
Prospective home buyers now need to earn approximately 80% more than they did in 2020 in order to attain the American dream of homeownership, and many have begun partnering with friends and family or “house hacking” their way to homeownership.
According to a recent Zillow report, buyers today must earn more than $106,000 in order to comfortably purchase a home. Since January 2020, the average monthly mortgage payment for a property in the U.S. has increased by about 96.4% to $2,188—assuming a 10% down payment was made. In that time, home values have increased 42.4%, with the average home currently valued at approximately $350,000. For most households that could afford a down payment, the cost of a home remained accessible with mortgage rates close to 3.5% as of January 2020. Approximately 6.6% was the mortgage rate at the time of this analysis.
A household earning the median salary would need to save for a down payment of 10% on a typical U.S. home for around 8.5 years, which is approximately one year longer than in 2020.
“Housing costs have soared over the past four years as drastic hikes in home prices, mortgage rates and rent growth far outpaced wage gains,” said Orphe Divounguy, Senior Economist at Zillow. “Buyers are getting creative to make a purchase pencil out, and long-distance movers are targeting less expensive and less competitive metros. Mortgage rates easing down has helped some, but the key to improving affordability long term is to build more homes.”
Zillow reports that a majority of Gen Z and millennial purchasers believe that “house hacking”—the option to rent out all or part of a property for additional income—is crucial in order to purchase a home in today’s market. Another strategy to help with affordability is to co-buy a home, with 21% of buyers from the previous year reported having co-purchased a home.
