A new, slower equilibrium may be settling in after years of imbalance

  • High mortgage rates stifled sales, now down 24% year over year and 17% from October 2019
  • Rates are also stymieing sellers. New listings dropped by more than 12% since September.
  • Typical rent in the U.S. fell for the first time in two years.

Buyers and sellers are both stepping away as skyrocketing mortgage rates have settled the housing market into a more balanced state, according to the latest Zillow® market report1. Home values remained nearly flat in October as new inventory waned and sales continued to fall from the pandemic frenzy.

“Home prices in October remained in suspended animation as more buyers, but especially sellers, took a wait-and-see approach to market conditions,” said Skylar Olsen, chief economist at Zillow. “Fewer home sales is the hallmark of a housing market lull, but right now potential sellers sensitive to losing their historically low mortgage rates have as much, if not more, of a reason to wait for a robust spring season and hope for mortgage rate relief. With some renewed competition, buyers hoping for aggressive price declines may be disappointed in all but the frothiest pandemic-era markets.”

Rapidly rising mortgage rates coupled with stubbornly high home prices are driving drastic drops in affordability. The share of income spent on monthly mortgage payments has risen from 27.7% in February to 37.3% in October — well above a previous peak of 35% in 2006. Housing payments are considered to be a financial burden when they exceed 30% of a household’s income.

The monthly mortgage payment on the purchase of a typical house in the U.S., even when putting 20% down, was $1,910 in October. That’s a 77% jump year over year and a 107% increase — nearly $1,000 — from 2019. Monthly payment figures are even higher when including taxes and insurance and when putting less than 20% down, as more than half of borrowers do.

Affordability challenges are weighing heavily on sales. Sales counts, nowcast for the most recent month due to latency, show significant slowing in recent months and standing 16% to 17% below pre-pandemic October norms.

While it’s tempting to focus on buyers, mortgage-rate-driven affordability changes are highly impactful on seller behavior, keeping more existing homes out of the market. While first-time buyers have experienced continued pressure on rent as well, homeowners who bought or refinanced when rates were near record lows in 2020 and 2021 are sitting on substantial home value gains and have little incentive to take out a new home loan, deciding instead to enjoy their current monthly payment.

To that point, the number of new for-sale listings dropped by more than 12% month over month, bringing the flow of listings to the market 24% lower than in 2021 and 21% below 2019. The steepest drops in new listings from September came in Seattle (-28.5%), Denver (-26%) and Washington, D.C. (-24.2%). New inventory increased month over month in two major metros — Jacksonville (3.1%) and Tampa (1.3%) — while the smallest declines took place in other Florida cities and across relatively affordable metros in the Midwest.

The drastic pullback of new listings has stalled out the recovery in total inventory that began in March. There are slightly more (1.8%) for-sale listings on Zillow than a year ago, but still far fewer (-36.1%) than in October 2019.

With both supply and demand drying up, U.S. home values held steady, rising 0.1% since September, marking the fourth consecutive month of muted movement. Typical home values are $358,458, up nearly 12% over 2021 and 43% higher than before the pandemic. Major metros with the largest home value appreciation since 2019 are Tampa (72%), Austin (64%), Jacksonville (62%) and Phoenix (60%).

Some expensive Western markets, including Los Angeles (+0.8%) and Riverside (+0.4%), abruptly snapped steep value-losing streaks; time will tell if September marked the bottom for price declines in these cities. Las Vegas (-2.3%) and Austin (-2.2%) saw the sharpest home value declines among major metro areas.

The Zillow Observed Rent Index showed a slight 0.1% decrease from September to October, ending a two-year streak in rent growth. The decline is a small step toward normalcy, harking back to October declines seen from 2017 through 2020. Typical U.S. rent is now $2,040, up 9.6% since last October and nearly 27% since 2019.

Metropolitan
Area*

October
Zillow
Home
Value
Index
(ZHVI)
(Raw)

October
ZHVI
Year-
Over-
Year
(YoY)
Change 

Monthly
Mortgage
Cost (20%
Down)

Monthly
Mortgage
Cost
Change,
YoY

New For-
Sale
Listings
Change,
Month
Over
Month
(MoM) 

Zillow
Observed
Rent
Index
(ZORI)

Zillow
Observed
Rent
Index
Change,
YoY

United States

$358,458

11.9 %

$1,910

77.0 %

-12.8 %

$2,040

9.6 %

New York, NY

$618,741

7.9 %

$3,303

69.7 %

-21.7%

$3,212

13.2 %

Los Angeles, CA

$904,367

5.4 %

$4,826

66.5 %

-15.2%

$2,979

8.9 %

Chicago, IL

$312,194

8.2 %

$1,663

70.8 %

-8.5%

$1,869

8.7 %

Dallas–Fort Worth, TX

$391,640

16.1 %

$2,082

84.3 %

-15.9%

$1,855

9.8 %

Philadelphia, PA

$341,929

9.8 %

$1,813

71.5 %

-7.2%

$1,793

6.8 %

Houston, TX

$315,089

13.0 %

$1,678

78.8 %

-13.4%

$1,613

5.8 %

Washington, DC

$552,639

6.0 %

$2,939

65.9 %

-9.9%

$2,257

6.5 %

Miami–Fort Lauderdale, FL

$473,630

23.3 %

$2,526

96.8 %

-13.6%

$2,827

16.4 %

Atlanta, GA

$380,542

14.2 %

$2,038

84.6 %

-12.9%

$2,002

7.2 %

Boston, MA

$646,045

6.9 %

$3,457

69.0 %

-4.0%

$2,806

10.1 %

San Francisco, CA

$1,369,586

1.9 %

$7,340

61.2 %

-7.4%

$3,199

5.8 %

Detroit, MI

$239,563

6.9 %

$1,276

68.2 %

-7.3%

$1,460

7.5 %

Riverside, CA

$571,380

8.3 %

$3,052

72.1 %

-14.5%

$2,584

7.1 %

Phoenix, AZ

$449,590

6.4 %

$2,418

70.7 %

-9.3%

$1,938

4.8 %

Seattle, WA

$757,177

7.9 %

$4,042

71.5 %

-16.5%

$2,285

6.8 %

Minneapolis–St. Paul, MN

$371,658

5.6 %

$1,979

65.7 %

-13.8%

$1,632

4.3 %

San Diego, CA

$876,288

7.6 %

$4,711

71.3 %

-16.3%

$3,105

12.8 %

St. Louis, MO

$246,368

10.1 %

$1,308

72.0 %

-5.6%

$1,273

9.8 %

Tampa, FL

$391,409

21.2 %

$2,090

94.0 %

-13.8%

$2,135

9.8 %

Baltimore, MD

$378,548

7.6 %

$2,014

68.4 %

-7.4%

$1,798

4.1 %

Denver, CO

$621,003

8.0 %

$3,319

71.8 %

-16.3%

$2,028

6.3 %

Pittsburgh, PA

$209,221

3.4 %

$1,117

62.4 %

-6.0%

$1,338

6.6 %

Portland, OR

$562,754

5.4 %

$3,008

66.5 %

-15.0%

$1,949

7.6 %

Charlotte, NC

$386,769

16.4 %

$2,072

86.9 %

-16.1%

$1,824

10.4 %

Sacramento, CA

$590,167

4.4 %

$3,153

64.3 %

-14.5%

$2,326

4.9 %

San Antonio, TX

$339,669

12.9 %

$1,818

80.2 %

-14/.8%

$1,518

6.0 %

Orlando, FL

$402,170

20.9 %

$2,148

94.0 %

-14.3%

$2,045

11.7 %

Cincinnati, OH

$265,208

10.2 %

$1,412

73.3 %

-5.9%

$1,505

11.5 %

Cleveland, OH

$219,237

9.7 %

$1,171

72.3 %

-5.3%

$1,370

8.8 %

Kansas City, MO

$291,747

10.4 %

$1,548

73.6 %

-6.8%

$1,364

11.0 %

Las Vegas, NV

$422,503

8.3 %

$2,304

77.6 %

-14.7%

$1,832

1.6 %

Columbus, OH

$302,536

10.7 %

$1,622

76.4 %

-3.9%

$1,509

9.0 %

Indianapolis, IN

$275,638

14.0 %

$1,466

80.9 %

-9.3%

$1,483

10.4 %

San Jose, CA

$1,568,484

6.2 %

$8,287

65.8 %

-11.7%

$3,341

8.3 %

Austin, TX

$541,125

2.3 %

$2,934

65.8 %

-21.6%

$1,912

6.0 %

Virginia Beach, VA

$335,691

10.6 %

$1,786

73.7 %

-17.3%

$1,648

5.3 %

Nashville, TN

$451,005

17.5 %

$2,420

90.2 %

-19.9%

$1,906

9.5 %

Providence, RI

$449,220

8.4 %

$2,398

71.2 %

-13.3%

$1,986

10.1 %

Milwaukee, WI

$271,085

8.5 %

$1,436

68.5 %

-1.0%

$1,243

6.8 %

Jacksonville, FL

$378,695

19.8 %

$2,024

92.4 %

-31.2%

$1,810

8.3 %

Memphis, TN

$236,600

13.2 %

$1,261

80.4 %

-15.9%

$1,501

7.6 %

Oklahoma City, OK

$223,762

13.5 %

$1,188

78.5 %

-7.5%

$1,316

6.4 %

Louisville, KY

$244,522

9.2 %

$1,302

72.4 %

-11.5%

$1,293

11.5 %

Hartford, CT

$324,546

10.3 %

$1,724

72.2 %

-6.2%

$1,707

9.1 %

Richmond, VA

$344,784

11.9 %

$1,834

75.5 %

-7.0%

$1,613

10.5 %

New Orleans, LA

$269,678

7.8 %

$1,442

70.6 %

-9.0%

$1,527

6.8 %

Buffalo, NY

$244,383

8.1 %

$1,303

69.9 %

-11.4%

$1,255

8.3 %

Raleigh, NC

$445,853

13.7 %

$2,396

84.5 %

-22.2%

$1,793

9.5 %

Birmingham, AL

$250,650

11.9 %

$1,335

76.6 %

-12.9%

$1,326

7.7 %

Salt Lake City, UT

$583,074

6.1 %

$3,110

69.0 %

-11.3%

$1,764

10.6 %

*Table ordered by market size

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.

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®; StreetEasy®; HotPads®; and ShowingTime+™, which houses ShowingTime®, Bridge Interactive®, and dotloop®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

SOURCE Zillow

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