Home values are edging down as buyers remain spooked by high mortgage rates, according to a new report.
The typical value of a home in the U.S. fell 0.3% in August from the previous month, according to real-estate company Zillow’s August market report. That’s the largest month-to-month drop since 2011, the company said.
Zillow cited “the historic rise in home prices over the pandemic, compounded by this year’s spiking mortgage rates.”
Though home-price appreciation has slowed since it peaked in April, home values are still up 14.1% from a year ago. They’re up nearly 44% from August 2019, before the onset of the coronavirus pandemic.
The typical 30-year mortgage rates has now surpassed 6%, meaning that monthly payments are significantly higher than just months ago. And, with home prices retreating only modestly, many would-be buyers consider a purchase still out of reach and remain on the sidelines.
“The prime suspect to explain the pullback in home-buyer demand is the huge decline in affordability over the past year. The diverging fortunes of more and less affordable markets backs up the hypothesis,” Zillow said.
“More affordable markets in the Midwest are generally retaining their heat while competition is cooling most rapidly in Western markets, especially those with the highest home prices and the ones that saw the most home-price appreciation over the pandemic.”
Home values fell the most in San Francisco, where they were down 3.4%, a percentage decline matched by Los Angeles. In Sacramento, values were down 3.2% and in Salt Lake City 2.6%.
Home values rose in a few markets, such as Birmingham, Ala.; Indianapolis; Cincinnati; and Louisville, Ky. Homes in these areas are typically priced at under $300,000.
With people hesitant to buy homes, the typical time a listing lasts on the market is increasing slightly: In August, the average listing was pending 16 days after first going active on Zillow. That typical market time was three days longer than in July.
Inventory is crawling up, rising by 1% from July.
“Typical mortgage payments show an even starker picture of the astronomical growth of expenses for new homeowners over the past three years,” Zillow said.
The typical monthly mortgage payment for a new home has jumped from $897 in August 2019 to $1,643 this year — an 83% increase. That’s an “astronomical growth of expenses for new homeowners over the past three years,” Zillow said.
Affordability has significantly declined. In April 2021, when the benchmark mortgage rate was around 3%, the annual income needed to buy a home at the median price of $340,700 was $79,600, researchers at the Harvard Joint Center for Housing Studies said on Friday. With rates at 5.41% in July, the annual income needed to buy a median-priced $403,800 home was $115,000, they said.
Emma Ockerman contributed to this report.
Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at firstname.lastname@example.org.
The housing market isn’t crashing, but it’s definitely feeling the burn.
After two frenzied years, home buying is cooling off as mortgage rates rise. Some experts in the field are calling it a “housing recession.”
U.S. home values fell in July by 0.1%, compared to the month before, a new Zillow report said.
While deceleration in home-price growth is typical for this time of the year, Zillow noted, the small decline is the first monthly dip since 2012.
The typical U.S. home value fell by $366 in July, and is now $357,107, as measured by the Zillow Home Value Index.
“The typical U.S. home value fell by $366 in July, and is now $357,170, as measured by the Zillow Home Value Index.”
Given the dip in July, Zillow revised its forecast for the growth in home values to 2.4% through the end of July 2023. The current rate of growth is 16%.
But this hardly counts as a crash in prices, because the typical home value is also up 44.5% from July 2019 before the COVID-19 pandemic.
At this point, sellers are finding themselves with fewer offers, and are having to offer more concessions themselves to entice buyers.
“ Sellers are finding themselves with fewer offers, and are having to offer more concessions themselves to entice buyers.”
Buyers in turn are gaining more options, seeing inventory gradually rise, as the pendulum slowly swings into their direction.
The dip in July is a “badly needed rebalancing that gives home buyers more options, more time to shop and more negotiating power,” Skylar Olsen, chief economist at Zillow
said in a statement.
Homes have become unaffordable for many, given the high prices and mortgage rates. “As prices soften, many will renew their interest, and we will continue our progress back to ‘normal’,” Olsen added.
Home value declines were largest in San Jose, Calif., San Francisco, Calif., Phoenix, Ariz., and Austin, Texas. In these markets, the time listings spend on the market is rising fast.
“‘Our prices have come off of their irrational highs of the last 18 months. It’s kind of a rebalancing.’”
“Our prices have come off of their irrational highs of the last 18 months. It’s kind of a rebalancing,” Dave Walsh, vice president and manager of Compass Realty San Jose, told MarketWatch.
Instead of homes listed on the market getting multiple offers, there are maybe one or two offers per home. “From your buyer’s point of view, there’s a much better opportunity for them to get something at a much more affordable price,” he added.
At open houses in the Bay Area, multiple buyers are turning up — but the lines are nowhere near as long as they were during the pandemic years. “That was just off the tracks,” Walsh, a four-decade housing-industry veteran, said. “We’ve never had a year like 2020 in many of my years in being in the business.”
Home values rose the most in Miami, Fla., Richmond, Va., and Memphis, Tenn. But monthly growth has decelerated as well in these markets, Zillow noted.
Here’s the top 10 market movers:
|City||July Zillow Home Value Index||Zillow Index change from June to July||Share of listings with a price cut|
|San Jose, Calif.||$1.56 million||-4.5%||19.5%|
|San Francisco, Calif.||$1.44 million||-2.8%||17.5%|
|Las Vegas, Nev.||$450,931||-1.4%||28.6%|
Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at email@example.com
That raises the question: Why does Zillow remain so bullish?
A lot of it boils down to supply. Between the first week of January and the first week of July, inventory levels on Zillow.com jumped 18%—going from 546,800 listings to 642,800 listings. Even with that jump, we’re still in a historically tight market. Inventory remains 54% below the 1.4 million active listings we had in July 2019. As long as inventory remains scarce, it’ll make it unlikely that existing home prices will fall.
That said, this latest Zillow forecast does mark another downward revision. In the face of weakening housing data, Zillow cuts its year-over-year home price outlook from 9.7% to 7.8%. That’s the fourth consecutive month that Zillow has issued a downward revision.
“The housing market is quickly rebalancing from what had been arguably the strongest sellers market in decades, with inventory rising and competition for homes easing in the face of significant affordability challenges. The rebalancing is expected to continue given current macroeconomic headwinds,” write Zillow researchers.
Nationally, Zillow foresees 7.8% house price growth over the coming 12 months. But regionally, it’ll vary—a lot.
Among the 911 regional housing markets that Zillow economists analyzed, 906 markets are predicted to see rising house prices between July 2022 and June 2023. Zillow only expects five markets to experience year-over-year declines. The biggest forecasted decline being 6.4% in Greenville, Miss.
Over the coming year, Zillow predicts that 741 markets will see house price growth of 5% or greater. While 136 markets are forecasted to see year-over-year house price growth of 10% or greater. That includes markets like Athens, Ga. (10.3% forecasted growth); Durango, Colo. (10.3%); Grenada, Miss. (10.3%); Fort Myers, Fla.(10.2%); and Morristown, Tenn. (10.2%).
Keep in mind some of this home price growth is already baked in. On the data collection end, home transactions lag. Many of the home sales that will go final in August and September actually occurred back in June and July.
Over the coming year, Moody’s Analytics forecasts that U.S. house prices will remain unchanged. That’d mark the lowest level of home price appreciation since 2011. But that’s nationally. On a regional level, Moody’s Analytics foresees around half the nation experiencing falling home prices.
Earlier this week, Fortune reached out to Moody’s Analytics to get access to its latest proprietary housing analysis. Researchers at the financial intelligence firm calculated how house prices are likely to shift in over 400 regional housing markets between the fourth quarter of 2022 and the fourth quarter of 2024.
Among the nation’s 414 largest housing markets, Moody’s Analytics predicts that 204 regional housing markets will see rising home prices over the next two years. Meanwhile, Moody’s Analytics expects 210 markets to see falling home prices. The steepest declines, Zandi says, will come in housing markets like Boise and Austin that are significantly “overvalued” relative to underlying economic fundamentals. If a recession comes, those markets could see prices fall by as much as 15% to 20%.
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The pandemic has changed the way the world communicates, from remote work Zoom meetings to social media. It’s also affected the efficiency in which many industries operate, including real estate. To better enhance the way agents promote themselves and their properties, Bravo’s Million Dollar Listing alum and founder of Douglas Elliman’s top-producing brokerage, The Eklund | Gomes Team, Fredrik Eklund recently co-founded new social real estate app REAL alongside entrepreneur Thomas Ma.
REAL is a social app for real estate that fuses an Instagram-style platform with WhatsApp-style chat abilities that allows agents to promote themselves for free and create another stream of revenue. Thus, it allows agents to take better control of their business. How REAL works is that agents and consumers create profiles and curate their feed of listings. Sellers, buyers, and other agents can follow each other to get a more in-depth sense of the agent’s offerings, personality, and style that they might not get from an advertisement. Not only might this enhance an agent’s revenue, but consumers are also able to find their ideal agent that specializes in a certain region, price point, and ore. The agents are able to curate their featured images, content, and chat topics that best reflect their personal knowledge and experience. The app also features a range of price points for home sales.
“Those in the real estate industry use traditional social media to market properties, which has been a trend for years and years,” Eklund tells Forbes. “With Covid-19, however, everything moved into the palms of our hands. With so many properties being sold via WhatsApp and over FaceTime, this app allows you to scroll through something very beautiful and aspirational, but also curated to your needs. With Instagram, Facebook, and, of course, TikTok, turning into video platforms very quickly, this app is exclusively developed for real estate agents on one hand and consumers, like buyers and sellers, on the other. I call our app, REAL, a combination of Zillow, WhatsApp, and Instagram.”
With home sales moving so quickly, the app allows people to communicate in real-time and immediately get in contact with an agent via the chat capability to receive immediate information about certain listings. Not just that, but agents are also able to promote properties not yet on the market. Sellers and buyers can follow and interact with several agents at once, whether they are buying a property or listing one. The high-speed accessibility of the app also makes the user experience seamless and efficient.
The free app uses advanced AI technology to conduct specific searches tailored to a specific need. People can perform very detailed searches, whether they want to look at kitchens or living rooms, or are looking for specific home amenities like a gym, home office, or swimming pool. The app then will tailor your content to what you’re looking for.
Agents can also communicate directly with each other at lightning speed to move transactions along and share information. The Eklund | Gomes Team, which has 92 agents in five states, uses the app’s chat capabilities over text so information won’t get lost.
Eklund partnered with Hong Kong-based Ma, a licensed real estate agent and successful entrepreneur, to address the current problems in the real estate market, which includes agents paying too much to advertise their properties, excessive follow-ups from clients, slow response times, ineffective cold calling, and so much more.
“Agents are getting licensed in many different states and there’s a complete crossover happening, especially in the luxury market,” he says. “Current real estate apps, like Zillow, do not provide quick answers and MLSs are slow. I run a large team and see all facets of the market, in all price points, and how quickly it moves. People want to use their mobile phones for this, they want it to be fun, and they want it to be FAST. At the same time, they see what people around them like and look at.”
He says that agents must pay sites like Zillow to have their listings featured, and those platforms ultimately retain control over what their listing looks like online. This app allows agents to post their listings for free and control the aesthetic of their page. It also allows agents to position themselves as a leader in their market. For example, Eklund recently opened a brokerage in Stockholm, and his agents are using the app to promote their properties and become an ambassador in that city.
“With so many properties being sold via WhatsApp and over FaceTime, this app allows you to scroll through something very beautiful and aspirational, but also curated to your needs,” he says. “You can use the functions of the app to find your home, or just sit there and dream away like you’d look at a beautiful magazine featuring the most beautiful real estate.”
The global app can be downloaded in different languages and in any city or town. Since its soft launch 11 months ago, there are over 147,500 downloads and is continuing to grow. He says that unlike Instagram, REAL is a true revenue stream, which he hopes will ultimately entice real estate agents to adopt the app into their business.
Today’s real estate market is one of the most competitive ever, with inventory near record lows and homes still selling at a pace much faster than historical norms. Affordability is increasingly becoming a challenge as interest rates and prices continue to rise. To increase options, many shoppers are expanding their house hunt farther afield, to more-distant neighborhoods, cities and even states.
“In today’s fast-paced market, home shoppers need to see as many options as possible with the fewest clicks,” said Jenny Arden, Zillow chief design officer. “This new Zillow feature allows users to refine their search and gives them confidence that all their options are in front of them. Whether they’re looking for apartments in only the hippest neighborhoods of Austin, Nashville or Raleigh, or focused on three-bedroom homes in a short list of Los Angeles suburbs, multi-location search will save home seekers time.”
How it works
Now available on the Zillow app, the multi-location search feature makes the home shopping experience faster, simpler and easier by allowing shoppers to find available homes in up to five different areas at once; it also gives users the option to easily sift through the listings on the map or all in the same results feed. In addition, users can save their multi-location searches and opt to receive email and push notifications with results and recommendations.
Zillow’s new and upcoming search features
The multi-location search feature is another step toward Zillow’s all-in-one platform, through which users can search, buy, sell, finance and rent properties. Zillow continues to develop new features and tools to help people more easily search for and get into the home of their dreams.
These upcoming and recently launched Zillow features help house shoppers to move faster during their search and zero in on only those homes that fit their needs:
- New search filters (tech in development): Zillow will soon introduce two new filters to help users find homes based on commute times and their own monthly budgets. The company is currently exploring further upgrades to its filtering capabilities to include more ways customers can search for homes on the site, such as by internet speeds, walkability, accessibility and more.
- Hide homes (tech in development): Often requested by home shoppers, this feature will give them the ability to hide homes they are not interested in, decluttering their search results as they continue browsing. Users can hide a home from the Home Details page, yet would still have access to their hidden homes in the “more” menu, in case they change their mind later.
- Auto-complete and guided search (currently available): While home browsing on Zillow, users are currently provided with region and address suggestions that fill in as they type. This experience is being improved to suggest popular criteria in a specific location that may match their personal lifestyle. For example, for a customer in a densely populated region like Seattle, “on-site parking” might be suggested. For a shopper in a warmer region like Phoenix, “A/C” might be suggested. This helps shoppers more easily consider and focus on the home features that are most important to them.
- Homes to Compare (currently available): The recently launched Homes to Compare tool gives home shoppers the ability to save up to five separate listings and see details on each property in a comprehensive side-by-side chart.
- Apple SharePlay™ (currently available): Whether browsing to buy a house with others or helping an out-of-town loved one narrow down options, Zillow surfers can shop collaboratively via the SharePlay software feature. Using Apple’s FaceTime® video and video calling, this Zillow feature allows users to search together, explore maps and view listing photo galleries in sync on Apple mobile devices. According to a recent Zillow survey, 86% of Zillow users report shopping with a partner, spouse, or housemate.
“Zillow designers and engineers are working every day to create new tools that help save our customers time and effort, and make shopping for a home on Zillow faster and easier,” Arden said.
About Zillow Group:
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life’s next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and ease.
Zillow Group’s affiliates and subsidiaries include Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®, ShowingTime®, Bridge Interactive®, dotloop®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).
SharePlay and FaceTime are registered trademarks of Apple Inc.