BAM Key Details: 

  • Zillow reports the U.S. housing market, weighed down by cost strains and seasonal cooling, is moving closer to “normal.” 
  • Mortgage rates are down and have brought a slight reduction in monthly mortgage costs, but rates are still high enough to make both buyers and sellers cautious about returning.

Zillow reports the U.S. housing market is closer to “normal.” Mortgage rates are lower and have brought a slight reduction in monthly costs. But they’re still high enough to be daunting for many.

Inventory is still less than ideal but more in line with seasonal expectations. And the typical time on market is higher than a year ago but lower than pre-pandemic norms.

Here are the highlights from the latest Zillow® data.

Lower mortgage rates are bringing monthly costs down

Mortgage rates have dropped over the past few months and are now hovering in the low 6s—though some agents have seen rates in the high 5s. That drop has brought a reduction in monthly mortgage payments. 

The housing market ended 2022 in a deep freeze, but there are some green shoots pushing up. The recent thaw in mortgage rates has begun to attract some renewed interest from buyers, and home sales are climbing again compared to last year. If rates continue to march down this spring and sellers return in seasonal force, the housing market just might get to have a normal—maybe even boring—year.

Jeff Tucker

Senior Economist at Zillow

Mortgage payments are down but still high enough to strain budgets

Even with the decline in mortgage rates—and the resulting drop in monthly payments—mortgage costs remain high enough to strain budgets and temper demand.

Monthly mortgage payments for a median-priced home have dropped more than $100 from their peak in October 2022, but they’re still almost double what they were in 2019.

At just under $1,800 for a median-priced home after a 20% down payment, they’re still 62% higher than December 2021—and a whopping $875 higher than December 2019.

Affordability challenges remain, impacting home sales across the country. Sales in November 2022, measured by Zillow’s nowcast, were down 33% compared to November 2021 and down 16% compared to November 2019.

But agents in some areas are seeing a stronger return of buyers and sellers to the market.

Typical time on market is at 30 days

According to the latest Zillow data, it now takes about 30 days to sell a home—five times longer than the six days it took in April 2022 and almost two-thirds of the time it took in 2019 (43 days). 

Properties in Western metros that became pandemic boomtowns are now spending the longest time on the market: 

  • Austin: 68 days
  • Las Vegas: 57 days
  • Phoenix: 55 days

Meanwhile, homes in more affordable metros are selling faster than the new average. Median listings in Hartford, Cincinnati, Kansas City, and Columbus went pending in two weeks or less.

The number of sales above list prices fell to 28%

The percentage of U.S. homes that sold above the list price dropped to 28%, the lowest since June 2020. That’s still higher than the 21% rate from November 2019. 

Relatively affordable metros, including Buffalo (63%), Hartford (57%), and Milwaukee (48%), are seeing the highest shares of homes selling above the list price 

Inventory decline is similar to pre-pandemic seasonal norms

Total housing inventory is declining more or less in line with pre-pandemic seasonal norms. Still, it’s surpassing last year’s numbers, rising from last January’s 26% annual deficit and now, in January 2023, standing at 16% above the previous year.

But what’s behind that recovery is the decline in home sales—not the addition of new listings.

Mortgage rates that are still high but dropping may be motivating current homeowners to wait on selling their properties until the market heats up in the spring. By then, the hope is mortgage rates will have dropped low enough to entice even those with 3% rates locked in.

December is typically the slowest time of the year for sellers, but new for-sale additions in December 2022 were significantly lower than in December 2019. And new for-sale listing levels have shown annual drops for eight consecutive months.

Rents and home values

Closing out 2022, typical rents in the U.S. slid for three consecutive months. But at $1,981, they’re still 7.4% higher than they were a year ago, according to Zillow research.

As for new developments in home values, in next month’s report, Zillow will roll out a new Zillow Home Value Index using data from the more accurate neural Zestimate model.

Top takeaways for real estate agents

Share this data with your clients as part of the information you provide to give them as full a picture of the housing market as possible.

Let your sellers know that those who take action and list their homes now can benefit from having less competition for buyer attention than they’re likely to have in the spring.

Right now, they stand a better chance of selling their homes at or above the list price, which would give them more money to work with when they put on their buyer hat. And whatever the mortgage rate does in the next weeks and months, having more money to put down on a home is not an advantage to take lightly.