Buyers are in the game, but interest rates are keeping sellers on the bench

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Mar 21, 2023, 08:00 ET

Relatively high rates are keeping new listings low, frustrating willing buyers

New listings are at a record low for February, contributing to an incredibly low supply.
Sales activity lost momentum in February as rates rose.
U.S. home values stabilized after a six-month decline.
Well-priced homes are moving. At 17 days, the median time to pending is faster than before the pandemic.

SEATTLE, March 21, 2023 /PRNewswire/ -- Mortgage rates — both their high levels and their wild swings — are making life difficult for both buyers and sellers, according to Zillow's® latest market report¹. Relatively high rates have brought new listings down to record lows, leaving buyers with limited options. Any dips in mortgage rates are stimulating demand and stiffening competition, but they have been short-lived.

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"We know there are a lot of motivated buyers looking for homes. When we see mortgage rates fall, sales pick up," said Skylar Olsen, Zillow chief economist. "But buyers are disappointed in their options. Homeowners aren't giving up their current house and low monthly payments to join a tight, expensive market. Meanwhile, volatility in the economy makes planning extremely difficult."

The flow of new listings in February is at a record low for this time of year, nearly a third lower than before the pandemic and 22% lower than last year. Mortgage rates are likely driving the decline — those who bought or refinanced in 2020 or 2021, when rates were well below 3.5%, are unwilling to trade in their current mortgage for a new one with double the interest, Olsen said. The largest annual declines in new listings are in West Coast markets: San Jose (-47%), Portland (-46%), Seattle (-45%) and Sacramento (-44%).

The trickle of new listings is contributing to extremely low levels of total inventory, now 17% higher than what was the absolute bottom in February 2022, but still about 43% below pre-pandemic norms. Instead of inventory growing through the first two months of the year, like it did in 2018 and 2019, the number of choices shrank.

"This market is not as frenzied as it was during the last two years, but home buyers might start to feel some déjà vu at the dearth of options," said Jeff Tucker, Zillow senior economist. "Home sellers seem to be sitting out the early spring selling season in surprising numbers."

Mortgage rates have been incredibly volatile over the past six months, and buyers are responding to the chance to lock in a cheaper monthly payment when the opportunity arises. Sales activity is picking up, just not accelerating like it usually does at this time of year. After being reinvigorated by lower rates in late January, sales slowed over the course of February as rates hiked back up. All in all, February saw 19% fewer newly pending sales than last year and 5% fewer sales than the most recent pre-pandemic reading in 2020.

Ultralow inventory means that when attractive, well-priced houses do come on the market, they are readily finding buyers. Homes that went under contract in February did so after a median span of 17 days. That's more time than in 2022 and 2021, when time on market was seven and nine days, respectively, but significantly less than before the pandemic.

Home values flatlined from January to February, leaving the typical home value at $328,604, or 4% below the peak value set in July 2022, according to the Zillow Home Value Index. Home values are 4.4% higher than one year earlier — a rapidly decelerating pace of annual growth, down from the nearly record-high 18.8% year-over-year growth measured last April. The overall lack of inventory, along with the resurgence of buyers when costs fall, should prevent significant price declines.

Rates are likely to remain volatile through the spring selling season. Working with a mortgage professional early in the process can help buyers demystify what's affordable, prepare their credit and get pre-approved to strengthen their offer.

Metropolitan Area*	February Zillow Home Value Index (ZHVI) (Raw)	ZHVI Change, Year over Year (YoY)	Monthly Mortgage Cost (at 20% Down)	Monthly Mortgage Cost Change, YoY	Total Inventory Change Since February 2020	New Inventory Change Since February 2020	Median Days on Market
United States	$328,604	4.4 %	$1,675	46.3 %	-38.1 %	-31.4 %	17
New York, NY	$564,512	3.5 %	$2,865	42.8 %	-43.9 %	-45.7 %	33
Los Angeles, CA	$847,694	-2.4 %	$4,407	38.4 %	-31.4 %	-41.0 %	19
Chicago, IL	$282,657	2.5 %	$1,433	42.0 %	-49.4 %	-43.7 %	12
Dallas, TX	$362,237	1.6 %	$1,859	44.6 %	-44.0 %	-41.7 %	17
Houston, TX	$296,706	3.3 %	$1,519	45.7 %	-30.2 %	-30.7 %	25
Washington, DC	$523,130	0.4 %	$2,673	39.8 %	-39.3 %	-40.3 %	7
Miami, FL	$446,337	10.5 %	$2,276	55.5 %	-38.8 %	-24.3 %	30
Philadelphia, PA	$321,429	5.7 %	$1,633	46.9 %	-39.7 %	-33.4 %	10
Atlanta, GA	$356,353	3.6 %	$1,825	46.6 %	-36.1 %	-33.3 %	20
Phoenix, AZ	$428,063	-1.9 %	$2,202	38.3 %	-2.5 %	-26.8 %	38
Boston, MA	$608,548	1.5 %	$3,109	42.3 %	-39.7 %	-39.6 %	9
San Francisco, CA	$1,079,746	-7.7 %	$5,556	31.0 %	-15.1 %	-36.9 %	14
Riverside, CA	$537,289	0.2 %	$2,772	41.8 %	-32.7 %	-38.5 %	27
Detroit, MI	$226,017	3.9 %	$1,146	44.5 %	-35.6 %	-32.6 %	15
Seattle, WA	$683,838	-3.9 %	$3,513	36.8 %	-16.3 %	-38.0 %	9
Minneapolis, MN	$349,932	0.3 %	$1,787	39.6 %	-46.7 %	-46.7 %	19
San Diego, CA	$828,029	-1.7 %	$4,250	39.7 %	-43.5 %	-43.2 %	12
Tampa, FL	$357,951	5.2 %	$1,831	49.5 %	-21.7 %	-24.3 %	21
Denver, CO	$568,870	-2.4 %	$2,921	37.4 %	-20.5 %	-26.1 %	9
St. Louis, MO	$224,179	4.9 %	$1,139	46.2 %	-51.1 %	-30.0 %	6
Baltimore, MD	$348,165	3.7 %	$1,763	42.5 %	-49.0 %	-38.3 %	8
Charlotte, NC	$353,739	4.0 %	$1,811	47.0 %	-2.5 %	-28.6 %	19
Orlando, FL	$376,324	5.8 %	$1,928	49.9 %	-23.0 %	-27.2 %	20
San Antonio, TX	$286,504	3.5 %	$1,464	45.3 %	-16.2 %	-18.8 %	28
Portland, OR	$524,621	-1.9 %	$2,691	37.4 %	-26.5 %	-38.5 %	12
Sacramento, CA	$544,971	-4.5 %	$2,803	34.4 %	-31.8 %	-45.3 %	17
Las Vegas, NV	$393,156	-2.1 %	$2,028	38.9 %	-13.7 %	-38.9 %	43
Pittsburgh, PA	$189,207	1.3 %	$964	41.9 %	-36.7 %	-24.9 %	11
Austin, TX	$475,191	-4.3 %	$2,451	37.2 %	25.8 %	-20.1 %	60
Cincinnati, OH	$253,512	4.8 %	$1,288	45.9 %	-38.5 %	-25.5 %	5
Kansas City, MO	$276,419	5.8 %	$1,404	47.2 %	-49.0 %	-38.5 %	5
Columbus, OH	$285,430	5.6 %	$1,454	48.4 %	-36.0 %	-28.6 %	5
Indianapolis, IN	$260,160	3.5 %	$1,325	45.4 %	-27.9 %	-20.6 %	10
Cleveland, OH	$201,852	6.2 %	$1,026	47.9 %	-47.7 %	-24.2 %	9
San Jose, CA	$1,381,757	-6.1 %	$7,225	35.6 %	-25.8 %	-39.0 %	17
Nashville, TN	$415,828	3.3 %	$2,128	46.7 %	-22.2 %	-21.9 %	21
Virginia Beach, VA	$314,340	4.3 %	$1,602	44.4 %	-49.8 %	-31.3 %	21
Providence, RI	$419,810	4.7 %	$2,139	46.9 %	-60.1 %	-40.0 %	10
Jacksonville, FL	$348,466	6.1 %	$1,785	51.3 %	-16.9 %	-24.7 %	37
Milwaukee, WI	$287,671	5.6 %	$1,457	45.4 %	-42.5 %	-29.3 %	20
Oklahoma City, OK	$217,846	6.9 %	$1,112	49.6 %	-24.5 %	-16.7 %	11
Raleigh, NC	$415,939	2.4 %	$2,129	45.2 %	-30.2 %	-33.8 %	13
Memphis, TN	$223,942	5.3 %	$1,142	48.0 %	-16.8 %	-18.7 %	24
Richmond, VA	$335,501	7.4 %	$1,706	49.5 %	-51.2 %	-36.9 %	6
New Orleans, LA	$230,141	-0.2 %	$1,166	36.7 %	32.4 %	21.7 %	29
Louisville, KY	$237,002	4.1 %	$1,207	44.5 %	-37.1 %	-20.4 %	7
Salt Lake City, UT	$519,638	-2.0 %	$2,657	37.5 %	-4.5 %	-30.2 %	20
Hartford, CT	$309,095	6.9 %	$1,571	49.3 %	-68.1 %	-41.9 %	6
Buffalo, NY	$230,715	4.1 %	$1,176	46.1 %	-42.3 %	-21.5 %	11
Birmingham, AL	$232,880	5.7 %	$1,184	47.5 %	-24.8 %	-22.1 %	12

*Table ordered by market size

¹ The Zillow Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Research. For more information, visit www.zillow.com/research.

About Zillow Group

Zillow Group, Inc. (NASDAQ: Z) (NASDAQ: ZG) is reimagining real estate to make it easier to unlock life's next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting, or financing with transparency and ease.

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SOURCE Zillow