Seasonal Cooling Cures Some Affordability Problems
January 23, 2023
“Rocketed” has been a common word used to describe the housing market over the last two years, but a confluence of events is causing that rocket to now come back to earth as affordability challenges kept demand in check, as told by Zillow.
According to their new report, falling mortgage rates lowered costs slightly, and a number of key indicators inched closer to seasonal norms during the slowest time of the year, typically.
Buyers should be keen on list prices that have been falling and more often selling for that price as 28% of homes sold above list price, a number not seen in two years. Metros with the highest share of homes selling above list price are relatively affordable: Buffalo (63%), Hartford (57%) and Milwaukee (48%).
"The housing market ended 2022 in a deep freeze, but there are some green shoots pushing up," said Jeff Tucker, senior economist at Zillow. "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."
The typical time a home on the market is now up to 30 days, up from a low of 6 days seen in since the pandemic, yet still lower than the 43 days reported before the pandemic.
Monthly mortgage payments have pulled back in December to $1,800, a decline of about $100 from the market peak in October 2022. But payments are still 62% higher than last December and are $875 higher than in December 2019. These affordability challenges are dragging demand down from the lofty heights seen earlier in the pandemic. Sales in November measured by Zillow's nowcast were down 33% year over year and 16% compared to 2019.
Typical rent closed out the year at $1,981, up 7.4% year-over-year.