High Interest Rates and Limited Availability of Existing Homes for Sale Have Not Weakened Buyer Demand

Zillow Group Inc. on Monday (11-13-23) released its latest market report for October. According to Zillow, although mortgage rates remain close to 23-year highs and existing home inventory remains lows, those factors seem to be spurring surprisingly strong competition. In the report, Zillow says that depleted inventory stocks are gradually recovering, and price appreciation is slowing, but demand has remained resilient, and attractive, appropriately priced listing are moving quickly.

Zillow points out that the key number for any potential buyer or seller is the mortgage rate, which climbed higher through October, finishing near 8%. Rate hikes had pushed monthly payments on a typical US home up by more than 4% from September to October. At $1,991, monthly payments are up almost 10% year-over-year have nearly doubled in the past 2-years (October 2021–October 2023).

The Zillow Home Value Index puts the typical US home value at $347,972, up 2.3% from last year. A 0.3% monthly decline in values in October is a tad steeper than the 0.1% dip from August to September and shows a slightly faster deceleration than pre-pandemic norms. Of note, home values fell in October in 40 of the top 50 markets.

Adding additional background and her analysis to the report, Zillow Chief Economist Skylar Olsen:

“With mortgage rates nearing 8% in October, the US housing market continues to turn cooler, with inventory rising, and appreciation decelerating. As interest rates rose, some pent-up sellers appear to have been shaken free of waiting for rates to drop. New listings have nearly escaped the red annually and are trending out of a mortgage rate lock-induced hole. A record number of households in prime home-buying ages are providing buyers, despite the headwinds.”