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The housing market is as competitive as ever despite 53% rise in mortgage costs

The housing market is as competitive as ever despite 53% rise in mortgage costs


There are signs a market rebalancing could be around the corner, but for now, the market is moving at record speed

  • U.S. home values continue to grow at a record pace, up 20.9% in the past year. The combination of rising prices and a spike in mortgage rates means the monthly mortgage payment on a typical home is 52.5% higher than it would have been a year ago. 
  • Rising costs have not yet eased competition. Homes are selling as fast as they ever have — after only seven days for the typical home — and nearly half of homes are selling for above their list price. 
  • There are faint signs the market is starting to rebalance, including growing inventory and a rise in listings with a price cut. 

SEATTLE, May 19, 2022 /PRNewswire/ — The housing market is as competitive as ever, according to the latest Zillow® Real Estate Market Report.i Buyer demand has been strong enough to keep the market moving at a record pace, even after a massive spike in mortgage rates.

Year-over-year home value growth set a record for the 13th consecutive month in April. The typical U.S. home is worth $344,141, 20.9% higher than a year ago. That record pace of growth comes despite rising mortgage rates eating away at what home buyers can afford. The monthly mortgage payment on the typical U.S. home is 11.7% higher than it would have been in March, and 52.5% higher than a year ago, assuming a 30-year mortgage with a 20% down payment.ii

“We do expect the market to begin rebalancing this spring as rising costs keep enough would-be buyers on the sidelines for inventory to begin catching up with demand, but we have not yet reached that point,” said Nicole Bachaud, Zillow economist. “Nearly half of homes are selling above their list price, and April sales happened as fast as we’ve ever recorded. It may very well be that fewer people are trying to buy, but with bidding wars continuing to drive up prices on limited inventory, those in the market today likely won’t feel much relief.”

To keep monthly mortgage costs the same as they would have been a year ago, today’s buyers must shop in a different price range. According to estimates from Zillow’s mortgage calculator, a buyer who can afford a monthly mortgage payment of $1,500 could have paid roughly $340,000 for a house a year ago, when mortgage rates were much lower. Today, that $1,500 monthly payment could buy a house worth about $275,000. And that is before factoring in home value growth of more than 20% during that time;  a buyer would have paid about $227,500 a year ago for that $275,000 home.iii

Rising costs have not yet eased competition. Homes that sold in April typically went pending after only seven days, tying a monthly record set last May and June. To put that remarkable market speed into perspective, in April 2019, the last spring before the pandemic, the typical home sat on the market for 24 days before an offer was accepted.

Nearly half (48%) of homes that were purchased in March — the latest data available — sold for more than the asking price, indicating the buyer expected multiple bidders. That’s up from 37.5% in March 2021. More than three-quarters of homes are selling above list price in the country’s most competitive markets: San Francisco (80.4%), Seattle (77.3%) and San Jose (76.1%). 

Faint signs are starting to emerge that a more balanced market is around the corner. The share of listings with a price cut crept up to 9.1%, higher than 8.6% in March and 7.8% last April. That may be a sign that sellers cannot be quite as ambitious in their pricing strategy as they could have been in recent months. 

Inventory continues to rise as well, up 5.5% from March — the second straight month of growth. The year-over-year inventory deficit has also shrunk in each of the past three months, now sitting at -19.5%.

More inventory is both the consequence and the cause of a more balanced housing market: It limits the number of buyers bidding on each home as there are more to choose from, and it prompts sellers to price their home competitively. 

Zillow’s home value forecast now calls for 11.6% growth through April 2023, down from a year-ahead forecast of 14.9% made in March. Zillow’s forecast for existing home sales has been lowered as well, now predicting 5.73 million sales in 2022. That would mark a 6.4% decrease from 2021. Spiking mortgage rates, inventory gains, and lower-than-expected pending home sales and mortgage application data drove the downward revision. 

These downwardly revised projections would still represent a very strong housing market in the coming year. Other than this recent run of record-breaking home value growth, only during a short stretch in 2005 have home values grown faster than 11.6% annually in the history of the Zillow Home Value Index. And while 5.73 million existing home sales would be a decrease from a remarkably strong 2021, that would mark the second-best calendar year total since 2006.

The pace of annual rent growth slowed for the second consecutive month. Rents are up 16.4% year over year, down from 17% annual growth in March. The typical U.S. rental unit costs $1,927 a month. 

Metropolitan Area*

Zillow
Home
Value
Index
(ZHVI)

ZHVI
YoY
Change

Monthly
Mortgage
Payment
on a
Typical
Home**

Monthly
Mortgage
Payment
on a
Typical
Home
YoY
Change

Median
Days to
Pending

Share
of
Homes
Sold
Above
List
(March
2022)

Zillow
Observed
Rent
Index
(ZORI)

ZORI
YoY
Change

United States

$344,141

20.9%

$1,475

52.5%

7

48.0%

$1,927

16.4%

New York, NY

$600,354

12.7%

$2,573

42.2%

22

46.7%

$3,004

20.5%

Los Angeles, CA

$932,783

20.9%

$3,998

52.4%

10

69.9%

$2,864

16.1%

Chicago, IL

$305,282

14.3%

$1,308

44.1%

7

36.7%

$1,883

11.4%

Dallas–Fort Worth, TX

$381,089

30.1%

$1,633

64.1%

8

63.0%

$1,750

17.9%

Philadelphia, PA

$327,347

13.7%

$1,403

43.4%

7

45.7%

$1,822

11.6%

Houston, TX

$299,998

22.5%

$1,286

54.5%

8

41.3%

$1,550

12.6%

Washington, DC

$550,917

11.0%

$2,361

39.9%

5

54.8%

$2,174

12.2%

Miami–Fort Lauderdale, FL

$430,068

28.1%

$1,843

61.6%

12

31.2%

$2,846

31.7%

Atlanta, GA

$367,946

30.4%

$1,577

64.4%

6

54.4%

$1,904

17.4%

Boston, MA

$649,034

15.1%

$2,782

45.1%

6

62.5%

$2,762

12.0%

San Francisco, CA

$1,489,691

20.1%

$6,385

51.5%

9

80.4%

$3,157

10.4%

Detroit, MI

$238,278

15.3%

$1,021

45.4%

5

45.5%

$1,405

11.2%

Riverside, CA

$578,174

27.6%

$2,478

60.9%

9

62.7%

$2,584

16.9%

Phoenix, AZ

$466,170

30.9%

$1,998

65.1%

7

50.5%

$1,911

21.6%

Seattle, WA

$791,933

25.7%

$3,394

58.5%

5

77.3%

$2,206

16.0%

Minneapolis–St. Paul, MN

$374,074

12.7%

$1,603

42.1%

8

53.8%

$1,624

6.6%

San Diego, CA

$923,350

28.0%

$3,957

61.4%

7

70.2%

$2,946

20.0%

St. Louis, MO

$239,028

15.3%

$1,024

45.4%

5

51.5%

$1,263

11.0%

Tampa, FL

$366,059

35.1%

$1,569

70.3%

5

48.0%

$2,055

26.9%

Baltimore, MD

$372,061

11.4%

$1,595

40.4%

5

46.9%

$1,776

10.7%

Denver, CO

$639,316

24.6%

$2,740

57.2%

5

69.5%

$1,940

15.1%

Pittsburgh, PA

$211,973

14.2%

$909

44.0%

8

33.7%

$1,323

8.1%

Portland, OR

$581,400

19.3%

$2,492

50.4%

5

62.7%

$1,821

12.6%

Charlotte, NC

$372,300

30.8%

$1,596

64.9%

4

57.8%

$1,738

17.4%

Sacramento, CA

$616,124

21.8%

$2,641

53.6%

7

67.3%

$2,233

12.3%

San Antonio, TX

$329,532

25.5%

$1,412

58.2%

7

49.8%

$1,441

15.3%

Orlando, FL

$376,474

31.7%

$1,614

66.1%

5

45.1%

$1,999

23.7%

Cincinnati, OH

$255,392

15.5%

$1,095

45.7%

3

44.4%

$1,412

11.3%

Cleveland, OH

$212,605

15.9%

$911

46.2%

5

45.0%

$1,344

11.3%

Kansas City, MO

$283,085

16.2%

$1,213

46.5%

3

53.7%

$1,338

11.1%

Las Vegas, NV

$437,478

33.3%

$1,875

68.1%

6

50.6%

$1,851

21.3%

Columbus, OH

$290,400

17.1%

$1,245

47.7%

3

58.2%

$1,430

12.2%

Indianapolis, IN

$263,495

20.5%

$1,129

52.0%

4

48.2%

$1,457

13.7%

San Jose, CA

$1,710,404

25.2%

$7,331

57.8%

8

76.1%

$3,199

12.4%

Austin, TX

$594,441

37.6%

$2,548

73.6%

11

61.7%

$1,823

20.0%

Virginia Beach, VA

$317,835

14.4%

$1,362

44.2%

13

57.1%

$1,584

12.3%

Nashville, TN

$433,158

32.8%

$1,857

67.5%

4

55.2%

$1,802

18.9%

Providence, RI

$438,168

16.8%

$1,878

47.2%

7

59.1%

$1,900

15.0%

Milwaukee, WI

$267,887

12.0%

$1,148

41.3%

22

55.2%

$1,242

7.3%

Jacksonville, FL

$355,286

32.4%

$1,523

67.0%

5

43.4%

$1,748

20.4%

Memphis, TN

$224,616

21.2%

$963

52.8%

9

49.6%

$1,526

14.2%

Oklahoma City, OK

$210,799

18.2%

$903

49.0%

4

45.5%

$1,318

12.3%

Louisville, KY

$236,137

14.1%

$1,012

43.9%

5

34.3%

$1,274

11.2%

Hartford, CT

$312,123

14.5%

$1,338

44.4%

6

59.5%

$1,590

11.3%

Richmond, VA

$320,654

13.2%

$1,374

42.8%

5

63.1%

$1,539

13.4%

New Orleans, LA

$264,185

14.2%

$1,132

44.0%

6

34.2%

$1,503

16.9%

Buffalo, NY

$241,651

18.8%

$1,036

49.8%

9

63.3%

$1,232

9.9%

Raleigh, NC

$445,219

36.4%

$1,908

72.0%

4

70.2%

$1,706

17.7%

Birmingham, AL

$234,645

17.7%

$1,006

48.4%

7

54.5%

$1,302

11.5%

Salt Lake City, UT

$602,765

28.8%

$2,583

62.4%

5

66.6%

$1,646

19.1%

*Table ordered by market size

**Principal and interest only, assuming a 30-year fixed-rate mortgage with a 20% down payment

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 Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Trulia®, Out East®, ShowingTime®, Bridge Interactive®, dotloop®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

i The Zillow Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Research. For more information, visit www.zillow.com/research. The data in the Zillow Real Estate Market Report is aggregated from public sources by a number of data providers for 931 metropolitan and micropolitan areas, dating back to 2000. All current monthly data at the national, state, metro, city, ZIP code and neighborhood levels can be accessed at www.zillow.com/research/data.

ii Principal and interest only. Property taxes, homeowners insurance and other additional costs are not included.

iii Estimated monthly mortgage payments in this example assume a 20% down payment, a property tax rate of 0.88%, annual home insurance costs of $1,260 and no HOA dues. Freddie Mac Primary Mortgage Market Survey data were used to estimate prevailing mortgage rates during each period.

 

SOURCE Zillow





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