Competition and a dwindling housing supply have fueled a hot home shopping season, states Zillow’s May 2023 Market Report. Despite not matching previous springs, typical U.S. home values grew by 1.4% from April to May, reaching $346,856—up 0.9% from last year. However, high mortgage rates deter sellers, resulting in record-low inventory levels. Monthly mortgage payments for an average-priced home now exceed $1,800, marking a 22% increase from last year and the second-highest on record. While some metro areas experienced a decline in home values, cities like Richmond, Miami, and Oklahoma City saw notable annual price gains.
Demand driven by affordability; Midwest leads in home value gains. Columbus tops with a 2.2% increase, followed by Cincinnati, Detroit, Richmond, and Milwaukee. West Coast tech hubs bounce back: San Jose (1.9%), Seattle (1.7%), San Francisco (1.4%). The housing market grapples with a year-long shortage of listings, down 23% YoY in May. Higher mortgage rates discourage sellers from seeking new loans. Many homeowners, with rates below 4%, prefer renting out properties over selling. Impacts buyers and hesitant sellers.
The scarcity of new listings and persistent buyer demand have led to soaring prices and a significant decrease in available inventory, reaching a record low for this time of year. In May, the number of homes listed on Zillow was 3.1% lower than the previous year and a staggering 46% lower than in May 2019.
However, there has been a notable improvement in sales, with newly pending listings increasing by 9.5% from April. This has resulted in a year-over-year decline of 18% in May, showing a steady recovery since March. Although these figures may seem lower compared to the peak of the pandemic, they are approaching levels similar to the pre-pandemic era.
Historically, pending sales have peaked in May of 2018, 2019, and 2022. The coming weeks will determine whether this seasonal pattern repeats itself or if the buying season extends into the summer, similar to what occurred in 2020 and 2021.