With the Federal Reserve signaling a rate cut on the way and mortgage rates already sliding, this year’s “offseason” is shaping up to be rife with opportunity for buyers, according to Zillow.
Those drops in mortgage rates have helped affordability across the country, with monthly payments (before taxes and insurance and assuming a 20% downpayment) now typically comprising less than one-third of median household income — a common threshold for affordability — on a national level. The monthly payment on a typical home purchase has dropped to $1,827, falling by 3.4% month over month and by over $100 since it peaked in May.
“Late summer may be an opportunity for buyers who have been waiting in the wings for a monthly mortgage payment they can qualify for,” said Zillow chief economist Skylar Olsen. “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 further in favor of buyers.”
Indeed, the Zillow Market Heat Index, which tracks competition for homes, shifted from being in favor of sellers to neutral in July, a shift that hasn’t occurred until October in the past two years. And while housing markets in most of the nation’s largest metro areas still favor sellers, some major cities in the Sun Belt, including Miami, Tampa, Orlando, Austin and Memphis, are fully turning the corner to the buyer’s advantage thanks to an influx of inventory.
While inventory growth has slowed nationally, there are still nearly 1.18 million homes on the market, more than any month since September 2020.
Of course, heightened opportunities for buyers could alter market dynamics by extending competition through the fall. More than a third of homes are selling for over asking price, per Zillow’s data, and the share of Zillow listings with a price cut fell from July to August, snapping a streak that first began in March. Just under 26% of homes on the market had a price cut in August — still high for this time of year, so it’s a statistic that bears watching as more buyers elect to leave the sidelines.
