Home buyers see first signs of affordability relief in months

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Dec 16, 2022, 08:00 ET

Affordability remains the biggest challenge facing home buyers today, but this small step forward is a welcome sight

The cost of a new mortgage dropped 4.8% in November as mortgage rates dipped.
Housing market activity is as chilled as it has been since the start of the pandemic.
Rents fell by the largest amount in at least seven years.

SEATTLE, Dec. 16, 2022 /PRNewswire/ -- After months of watching the cost of a new mortgage rise higher and higher, home buyers finally saw some relief in November. A combination of declining home values and lower mortgage rates brought the monthly mortgage payment on a typical U.S. home down by about $100, according to the latest Zillow® Market Report¹. Still, monthly mortgage costs are up $720, or 66.1%, over the past year².

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U.S. home values are easing down as affordability challenges vex potential buyers. The typical U.S. home is worth $357,733, 0.2% less than in October and down 0.5% from a peak in June. Higher mortgage rates shoulder much of the responsibility for today's chilled market. By the same token, mortgage rates falling in November brought monthly costs down for the first time since July, and for only the second time in the past 19 months. While it's unlikely affordability will significantly improve anytime soon, November's news is a positive sign that affordability may at least stabilize in 2023, helping households budget and plan for housing decisions in the months and years ahead.

"The housing market entered a deep freeze this November as buyers paused their purchasing plans, likely till after New Year's in many cases," said Zillow senior economist Jeff Tucker. "The two big questions are whether mortgage rates will continue to decline, and whether that will be enough to bring buyers back in time for the spring selling season. In the meantime, those on the prowl for a house will benefit from motivated sellers, unusual bargains and a welcome lack of competition."

While national home value declines from peak levels have been minimal, some markets have seen significant changes. The largest declines from peak are in the most expensive markets — San Jose (-10.6%) and San Francisco (-9.5%) — as well as Western markets that saw the largest pandemic-era appreciation: Austin (-10.4%), Phoenix (-8.1%) and Las Vegas (-8%).

Of the 14 major markets in which home values are still growing, almost all are less expensive than the national average and are located in the inland South or Midwest and Great Lakes regions. Relative affordability in the latter two areas is one reason Zillow economists expect them to host the healthiest housing markets in 2023.

But the slight drop in mortgage costs isn't reinvigorating the market yet. Between the annual winter doldrums and serious affordability concerns, activity in the market was as slow as it's been since the outbreak of the pandemic; both sales and new listings of existing homes continued to fall in November.

The number of listings that went pending in November fell by 16.5% from October and is down 38% compared to last November. New listings — the flow of existing homes onto the market from sellers — are also anemic, sitting 25.4% lower than last year. Many homeowners who might like to sell their home are being deterred by the higher borrowing cost they'd need to pay on their next home's mortgage.

Beyond the slight decline in mortgage costs, reduced activity and competition in the market brought a bit more good news to those still on the hunt for a house or those who are considering jumping in. Total inventory is up 7% year over year, by far the largest increase since at least the start of 2018. Listings' median time on market before going pending is now 22 days — twice as long as last November and a far cry from the trough of six days in March and April.

Renters received relief, as well. U.S. rents fell 0.4% from October to November, the largest one-month decline in the seven-year history of the Zillow Observed Rent Index. This comes on top of a 0.1% decline in October, and decisively closes the door on a period of nearly two years of above-average monthly rent increases that began in November 2020.

Metropolitan Area*	November Zillow Home Value Index (ZHVI) (Raw)	November ZHVI Decline from Peak	Monthly Mortgage Cost (at 20% Down)	Monthly Mortgage Cost Change, Month over Month	Total Inventory Change, Year over Year (YoY)	Median Days on Market Change (YoY)	Zillow Observed Rent Index (ZORI)
United States	$357,733	-0.5 %	$1,809	-4.8 %	7.0 %	11	$2,008
New York, NY	$619,212	-0.3 %	$3,125	-4.8 %	-14.5 %	-6	$3,130
Los Angeles, CA	$890,637	-7.2 %	$4,541	-5.4 %	9.2 %	13	$2,950
Chicago, IL	$309,755	-1.4 %	$1,568	-4.8 %	-18.9 %	5	$1,851
Dallas–Fort Worth, TX	$387,308	-3.0 %	$1,965	-5.0 %	4.0 %	6	$1,833
Philadelphia, PA	$343,687	0.0 %	$1,727	-4.3 %	-10.4 %	4	$1,780
Houston, TX	$314,507	-0.4 %	$1,589	-4.8 %	12.2 %	16	$1,651
Washington, DC	$551,159	-0.7 %	$2,784	-4.7 %	-11.0 %	10	$2,223
Miami–Fort Lauderdale, FL	$482,142	0.0 %	$2,418	-4.3 %	11.4 %	12	$2,788
Atlanta, GA	$381,824	-0.8 %	$1,929	-5.0 %	14.2 %	18	$1,980
Boston, MA	$643,642	-2.8 %	$3,264	-5.1 %	-1.1 %	4	$2,827
San Francisco, CA	$1,348,851	-9.5 %	$6,908	-5.6 %	10.3 %	13	$3,138
Detroit, MI	$238,807	-2.7 %	$1,208	-4.7 %	0.6 %	9	$1,454
Riverside, CA	$570,211	-4.2 %	$2,891	-5.2 %	24.1 %	22	$2,554
Phoenix, AZ	$442,788	-8.1 %	$2,261	-6.0 %	36.3 %	31	$1,911
Seattle, WA	$761,311	-5.8 %	$3,841	-4.8 %	37.6 %		$2,220
Minneapolis–St. Paul, MN	$369,332	-2.8 %	$1,871	-4.9 %	-7.6 %	11	$1,631
San Diego, CA	$877,278	-7.0 %	$4,457	-5.4 %	17.2 %	15	$3,056
St. Louis, MO	$246,185	-0.1 %	$1,241	-4.5 %	-8.9 %	3	$1,283
Tampa, FL	$390,288	-0.4 %	$1,976	-5.0 %	41.2 %	15	$2,108
Baltimore, MD	$378,735	0.0 %	$1,909	-4.6 %	-15.3 %	5	$1,778
Denver, CO	$616,998	-5.1 %	$3,134	-5.1 %	38.1 %		$2,006
Pittsburgh, PA	$208,706	-2.8 %	$1,055	-4.9 %	-0.2 %	7	$1,342
Portland, OR	$562,334	-5.1 %	$2,847	-4.9 %	17.4 %	19	$1,914
Charlotte, NC	$387,981	-0.6 %	$1,959	-4.9 %	-2.5 %	14	$1,801
Sacramento, CA	$586,357	-6.4 %	$2,986	-5.2 %	18.7 %	19	$2,277
San Antonio, TX	$341,113	-1.0 %	$1,724	-4.9 %	36.7 %	19	$1,494
Orlando, FL	$399,733	-0.8 %	$2,023	-5.0 %	26.2 %	17	$2,008
Cincinnati, OH	$266,974	0.0 %	$1,343	-4.4 %	-12.7 %	5	$1,514
Cleveland, OH	$220,070	0.0 %	$1,107	-4.7 %	-4.8 %	5	$1,357
Kansas City, MO	$294,164	0.0 %	$1,476	-4.3 %	1.1 %	7	$1,354
Las Vegas, NV	$417,523	-8.0 %	$2,142	-6.5 %	49.1 %	33	$1,817
Columbus, OH	$303,412	-0.8 %	$1,534	-4.9 %	1.1 %		$1,472
Indianapolis, IN	$275,558	0.0 %	$1,391	-4.6 %	15.2 %	10	$1,466
San Jose, CA	$1,517,298	-10.6 %	$7,869	-4.6 %	3.4 %	12	$3,283
Austin, TX	$538,173	-10.4 %	$2,749	-5.9 %	38.1 %	35	$1,904
Virginia Beach, VA	$336,622	0.0 %	$1,696	-4.5 %	-16.2 %	4	$1,630
Nashville, TN	$452,612	-1.9 %	$2,298	-5.2 %	50.7 %	22	$1,879
Providence, RI	$450,111	-1.0 %	$2,274	-4.7 %	-11.6 %	4	$1,944
Milwaukee, WI	$272,113	0.0 %	$1,369	-4.4 %	-30.3 %	-5	$1,225
Jacksonville, FL	$374,053	-1.4 %	$1,901	-5.1 %	38.8 %	26	$1,773
Memphis, TN	$237,910	0.0 %	$1,201	-4.8 %	16.3 %	10	$1,494
Oklahoma City, OK	$225,718	0.0 %	$1,133	-4.3 %	13.6 %	8	$1,314
Louisville, KY	$245,599	0.0 %	$1,236	-4.5 %	-7.8 %	8	$1,302
Hartford, CT	$325,156	0.0 %	$1,632	-4.5 %	-27.2 %	0	$1,699
Richmond, VA	$344,849	0.0 %	$1,742	-4.6 %	-7.3 %	5	$1,567
New Orleans, LA	$267,805	-1.5 %	$1,358	-5.3 %	46.6 %	24	$1,515
Buffalo, NY	$246,264	-1.1 %	$1,239	-4.6 %	-8.0 %	4	$1,233
Raleigh, NC	$436,275	-7.2 %	$2,248	-6.0 %	40.5 %		$1,761
Birmingham, AL	$249,311	-0.5 %	$1,262	-4.9 %	18.2 %	12	$1,310
Salt Lake City, UT	$577,450	-7.9 %	$2,942	-5.1 %	46.6 %	24	$1,755

*	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.
²	Cost of a new mortgage on a home purchased at the Zillow Home Value Index. Assuming a 20% down payment and a 30-year, fixed-rate mortgage at the average weekly mortgage rate in November according to Freddie Mac's Primary Mortgage Market Survey. Principal and interest only.

About Zillow Group

Zillow Group, Inc. (NASDAQ: Z and 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