Mortgage News April 1, 2023
Zillow’s latest market report states that both buyers and sellers are facing challenges due to the elevated levels and volatile fluctuations of mortgage rates. Record lows in new listings are being observed due to the relatively high rates, resulting in limited options for buyers. Although any temporary reductions in mortgage rates are encouraging demand and intensifying competition, they are not enduring.
The record-low number of new listings observed in February is nearly 30% lower than pre-pandemic levels and 22% lower than the previous year. The decline can be attributed to mortgage rates, as individuals who purchased or refinanced their homes in 2020 or 2021 when rates were significantly below 3.5% are reluctant to replace their current mortgages with higher interest ones. According to Olsen, the most substantial drops in new listings are observed in West Coast markets, including San Jose (-47%), Portland (-46%), Seattle (-45%), and Sacramento (-44%).
The small influx of new listings is exacerbating the already extremely low levels of total inventory, which are currently 17% higher than the absolute bottom observed in February 2022, but still about 43% lower than pre-pandemic levels. Unlike in 2018 and 2019, when inventory expanded during the first two months of the year, the number of options available decreased.
The scarcity of inventory implies that when appealing and reasonably priced homes become available, they are promptly purchased by buyers. Properties that were placed under contract in February took a median of 17 days to do so. Although this is longer than in 2022 and 2021, when the average time on the market was seven and nine days, respectively, it is still considerably shorter than pre-pandemic figures.
The Zillow Home Value Index reveals that home prices remained stagnant from January to February, resulting in an average home value of $328,604, which is 4% below the highest recorded value in July 2022. Although home values are currently 4.4% higher than the previous year, this rate of annual growth is decreasing rapidly compared to the nearly record-high growth of 18.8% measured in April 2022. Nevertheless, the scarcity of inventory and the resurgence of homebuyers when costs decrease are expected to prevent substantial price declines.
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