Lower Mortgage Rates and Increasing Inventory Give Would Be Home Buyers a Window of Opportunity

On Thursday, Zillow released its latest report on home sales activity, which showed that lower mortgage rates and rising inventory are giving home buyers a window of opportunity at an unusual time of year. Zillow data points out that affordability has improved substantially for home buyers, and competition among them could extend into the fall instead of fading away as is typical at this time of year.

Mortgage rate declines have made buying a home roughly affordable again at the national level (meaning monthly payments generally take less than one-third of median household income), assuming a buyer puts 20% down and before taxes and insurance are accounted for. Nationwide, the monthly payment on a typical home purchase has fallen by more than $100 since a peak in May.

Zillow points out that beyond lower costs, a number of metrics are moving in buyers’ favor. The Zillow market heat index shifted from being in favor of sellers into neutral territory in July. For the past two years, sellers held their edge nationally until October.

In addition, homes are taking longer to sell than in recent history, but shorter than in pre-pandemic times. Homes that sold in August took 20 days to go pending—two more than in July but about six days faster than at this time of year before the pandemic. And while inventory growth has slowed, nearly 1.18 million homes are on the market, more than any month since September 2020.

In remarks accompanying the report, Zillow Chief Economist Skylar Olsen said:

“Late summer may be an opportunity for buyers who have been waiting in the wings for a monthly mortgage payment they can qualify for. Buyers have more options to choose from for two reasons. For one, it’s easier to qualify for more of the homes on the market now that mortgage rates are a bit lower. Beyond that, more inventory is becoming available—enough to improve buyer negotiating power. Attractive properties in hot markets are still selling quickly, but some metros—or neighborhoods within them—have flipped in favor of buyers.”