Five months of generally falling mortgage rates earlier this year resulted in a boost in buying power of more than $40,000 for home shoppers, according to Zillow’s Housing Market Report for September.
Freddie Mac charted the rate for a 30-year fixed mortgage as falling from 7.22% on May 2 to a two-year low of 6.08% on Sept. 26. The drop of 1.14 percentage points resulted in the increase in buying power, which allowed potential buyers to afford more homes up for sale.
In recent weeks, unfortunately, a portion of that buying power evaporated as Freddie Mac recorded rates rising to 6.32% on Oct. 3. In response, home sellers were offering price cuts in the fall to attract buyers ahead of the holiday season.
Zillow found that there were also indications that the number of sellers joining the market was greater than the number of buyers, slightly easing the competitive pressure. While new listings decreased by 8.3% in September from the month before, there were 21.6% more active listings in September compared to a year earlier.
Nationally, the housing market was described as neutral, but Zillow’s Market Heat Index, which records the balance of home supply and demand in a city, has found that 10 of the 50 largest metropolitan areas in the country are now considered buyer’s markets and all of them were in the Southern states of Florida, Georgia, Louisiana, Tennessee and Texas.
Home values fell on a annual basis in seven major metropolitan areas. The largest drops were recorded in New Orleans and Austin, both of which saw values fall 4%. Other cities experiencing downward pressure on home values included San Antonio, which was down 2.7%; Birmingham, Alabama (-0.7%); and Tampa (-0.5%).
Home values for the past year increased in 43 major metro areas, with the largest jumps recorded in San Jose (7.8%); Hartford, Connecticut (7.6%); New York City (7.1%); and Providence, Rhode Island (7%). Zillow estimates that the typical U.S. home is now valued at $360,999, while the typical monthly mortgage payment, assuming 20% down, is $1,760. Mortgage payments are still on the rise, increasing 7.5% in the past year and jumping 97.3% from before the pandemic.
