BAM Key Details:

  • Zillow released its May 2023 Housing Market Report, showing a 1.4% increase in home prices from April to May and a 0.9% increase from May 2022. 
  • Buyer competition for available homes is driving up prices as persistently high mortgage rates continue to deter would-be sellers, keeping inventory low. 

Buyer competition is driving up prices on available homes while high mortgage rates keep many would-be sellers from listing. 

Zillow just released its May 2023 Housing Report with the latest in home values, pending sales, housing inventory, and rent growth across the U.S. And what it reveals is an influx of determined buyers met with a continued shortage of affordable homes

As homeowners wait for interest rates to drop before listing their homes, active listings reached its lowest number on record for the month of May. 

Many homeowners are still opting not to sell and give up historically low mortgage rates. But those who do have been rewarded with bidding wars as buyers compete for limited options. Spring is traditionally the hottest time of year in the housing market, and 2023 has been no exception. Time will tell if seasonal price slowdowns arrive on time this year, later in summer.

Jeff Tucker

Zillow Senior Economist

Typical home values across the U.S. climbed 1.4% from April to May—the largest monthly increase since June of last year—bringing the typical home price up 0.9% year over year to $346,856. That number is also 3.4% higher than the low reached in January of this year. 

A new mortgage loan on a home at that price would come with monthly payments just under $1,800—22% higher than one year ago, twice that of May 2019, and the second-highest typical home value after October 2022. 


Source: Zillow

Regional home price trends

The regional housing markets heating up the fastest are the relatively affordable ones. The Midwest, in particular, is home to six of the seven markets with the biggest monthly gains in home values. 

Top five metros with the biggest monthly increases in typical home values:

  • Columbus, OH (+2.2%)
  • Cincinnati, OH (+2.2%)
  • Detroit, MI (+2.1%)
  • Richmond, VA (+2.1%)
  • Milwaukee, WI (2.0%)

On a monthly basis, home prices did not drop in any of the 50 largest U.S. metros. But the smallest monthly gains were in— 

  • Las Vegas (+0.5%)
  • New Orleans (+0.6%)
  • Phoenix (+0.6%)
  • Austin (+0.6%)
  • San Antonio (+0.7%)

Growth in home values also rebounded in West Coast tech hubs after prices fell late in 2022. Home price growth outpaced the national average for the second consecutive month in San Jose (1.9%), Seattle (1.7%) and San Francisco (1.4%). 

Year over year, home values in May were down in over half (27) of the 50 largest U.S. metros. These five saw the steepest annual declines

  • Austin (-11.2%)
  • San Francisco (-9.3%)
  • San Jose (-8.4%)
  • Phoenix (-7.0%)
  • Las Vegas (-6.9%)

Meanwhile, these metros had the biggest annual gains in home prices: 

  • Richmond (+5.8%)
  • Miami (+5.4%)
  • Oklahoma City (+4.9%)
  • Kansas City (+4.1%)
  • Cincinnati (+4.0%)

Source: Zillow

High mortgage rates deter sellers, keeping inventory low

Year over year, new listings for May fell 23%, which is less of a drop-off than we saw in April (-28%) but similar to the 22% annual drop in March. 

The shortage of new listings has plagued the housing market for nearly a year and the primary cause is still higher mortgage rates—specifically the 30-year fixed, which at the time of this writing, was 6.92%, compared to 5.1% a year ago and 3% two years ago.

Those rates make it far more expensive for homeowners to list their homes–-for two reasons:

  1. Once they sell, they have to contend with those rates as buyers, likely ending up with a higher monthly payment for their next home
  2. Many homeowners are sitting on low rates (3-4%) and are weighing the benefits of selling vs. renting out their homes for more than the cost of holding onto it.

Total active inventory for May fell 3.1% year over year and is now down 45.7% from May 2019 levels. The small annual drop for May comes after 11 consecutive months of annual gains—starting with tiny upticks last summer and growing to 19.5 annual growth in January before sliding down to May’s modest deficit. 

May’s active inventory total reached its lowest level for any May on record. And absent any dramatic changes (like a plummeting mortgage rate), June may also see a new low for the month.

Meanwhile, if buyer demand remains strong, low inventory levels will likely continue to drive home values up as spring turns into summer. 


Source: Zillow

Buyers are still buying, despite less-than-ideal conditions

May brought a 9.5% monthly increase in newly pending listings—up to about 295,000—reducing the annual decline to 18%, down from the 21% annual drop in April and the 24% annual drop in March. 

That uptick in pending sales is a bit of a mystery since mortgage rates actually increased in the second half of May. But it could simply be in keeping with spring home buying trends. 

May was the month in which pending home sales peaked in 2018, 2019, and 2022. Data in the coming weeks will reveal whether that trend will hold up in 2023 or if pending sales will peak in summer as they did in 2020 and 2021. 


Source: Zillow

Rent growth continues to slow

Month over month, asking rents in May rose 0.6%, which is almost normal for this time of year. Year over year, they climbed 4.8%, but this year to date, they’ve increased by only 1.9%, giving 2023 a relatively slow start. The May 2023 Rental Market Report goes into more detail.

Read the full May 2023 Housing Market Report for more. 


Source: Zillow

Takeaways for real estate agents

As an agent, you should have your finger on the pulse of buyer competition in your area to help any homeowners who are wondering whether to sell now or wait for rates to go down. 

The fiercer the competition, the more likely you are to encounter buyers wondering where to find an affordable home that meets their needs—and how much they should offer for one that ticks all the boxes on their must-have list