Home prices plateau as high mortgage rates chill market

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Nov 17, 2022, 14:58 ET

A new, slower equilibrium may be settling in after years of imbalance

High mortgage rates stifled sales, now down 24% year over year and 17% from October 2019
Rates are also stymieing sellers. New listings dropped by more than 12% since September.
Typical rent in the U.S. fell for the first time in two years.

SEATTLE, Nov. 17, 2022 /PRNewswire/ -- Buyers and sellers are both stepping away as skyrocketing mortgage rates have settled the housing market into a more balanced state, according to the latest Zillow® market report¹. Home values remained nearly flat in October as new inventory waned and sales continued to fall from the pandemic frenzy.

Zillow Home Value Index, 2008 to October 2022 (PRNewsfoto/Zillow)

Zillow logo (PRNewsfoto/Zillow Group)

"Home prices in October remained in suspended animation as more buyers, but especially sellers, took a wait-and-see approach to market conditions," said Skylar Olsen, chief economist at Zillow. "Fewer home sales is the hallmark of a housing market lull, but right now potential sellers sensitive to losing their historically low mortgage rates have as much, if not more, of a reason to wait for a robust spring season and hope for mortgage rate relief. With some renewed competition, buyers hoping for aggressive price declines may be disappointed in all but the frothiest pandemic-era markets."

Rapidly rising mortgage rates coupled with stubbornly high home prices are driving drastic drops in affordability. The share of income spent on monthly mortgage payments has risen from 27.7% in February to 37.3% in October — well above a previous peak of 35% in 2006. Housing payments are considered to be a financial burden when they exceed 30% of a household's income.

The monthly mortgage payment on the purchase of a typical house in the U.S., even when putting 20% down, was $1,910 in October. That's a 77% jump year over year and a 107% increase — nearly $1,000 — from 2019. Monthly payment figures are even higher when including taxes and insurance and when putting less than 20% down, as more than half of borrowers do.

Affordability challenges are weighing heavily on sales. Sales counts, nowcast for the most recent month due to latency, show significant slowing in recent months and standing 16% to 17% below pre-pandemic October norms.

While it's tempting to focus on buyers, mortgage-rate-driven affordability changes are highly impactful on seller behavior, keeping more existing homes out of the market. While first-time buyers have experienced continued pressure on rent as well, homeowners who bought or refinanced when rates were near record lows in 2020 and 2021 are sitting on substantial home value gains and have little incentive to take out a new home loan, deciding instead to enjoy their current monthly payment.

To that point, the number of new for-sale listings dropped by more than 12% month over month, bringing the flow of listings to the market 24% lower than in 2021 and 21% below 2019. The steepest drops in new listings from September came in Seattle (-28.5%), Denver (-26%) and Washington, D.C. (-24.2%). New inventory increased month over month in two major metros — Jacksonville (3.1%) and Tampa (1.3%) — while the smallest declines took place in other Florida cities and across relatively affordable metros in the Midwest.

The drastic pullback of new listings has stalled out the recovery in total inventory that began in March. There are slightly more (1.8%) for-sale listings on Zillow than a year ago, but still far fewer (-36.1%) than in October 2019.

With both supply and demand drying up, U.S. home values held steady, rising 0.1% since September, marking the fourth consecutive month of muted movement. Typical home values are $358,458, up nearly 12% over 2021 and 43% higher than before the pandemic. Major metros with the largest home value appreciation since 2019 are Tampa (72%), Austin (64%), Jacksonville (62%) and Phoenix (60%).

Some expensive Western markets, including Los Angeles (+0.8%) and Riverside (+0.4%), abruptly snapped steep value-losing streaks; time will tell if September marked the bottom for price declines in these cities. Las Vegas (-2.3%) and Austin (-2.2%) saw the sharpest home value declines among major metro areas.

The Zillow Observed Rent Index showed a slight 0.1% decrease from September to October, ending a two-year streak in rent growth. The decline is a small step toward normalcy, harking back to October declines seen from 2017 through 2020. Typical U.S. rent is now $2,040, up 9.6% since last October and nearly 27% since 2019.

Metropolitan Area*	October Zillow Home Value Index (ZHVI) (Raw)	October ZHVI Year-Over-Year (YoY) Change	Monthly Mortgage Cost (20% Down)	Monthly Mortgage Cost Change, YoY	New For-Sale Listings Change, Month Over Month (MoM)	Zillow Observed Rent Index (ZORI)	Zillow Observed Rent Index Change, YoY
United States	$358,458	11.9 %	$1,910	77.0 %	-12.3 %	$2,040	9.6 %
New York, NY	$618,741	7.9 %	$3,303	69.7 %	-15.2 %	$3,212	13.2 %
Los Angeles, CA	$904,367	5.4 %	$4,826	66.5 %	-10.6 %	$2,979	8.9 %
Chicago, IL	$312,194	8.2 %	$1,663	70.8 %	-16.8 %	$1,869	8.7 %
Dallas–Fort Worth, TX	$391,640	16.1 %	$2,082	84.3 %	-17.5 %	$1,855	9.8 %
Philadelphia, PA	$341,929	9.8 %	$1,813	71.5 %	-10.8 %	$1,793	6.8 %
Houston, TX	$315,089	13.0 %	$1,678	78.8 %	-11.0 %	$1,613	5.8 %
Washington, DC	$552,639	6.0 %	$2,939	65.9 %	-24.2 %	$2,257	6.5 %
Miami–Fort Lauderdale, FL	$473,630	23.3 %	$2,526	96.8 %	-0.6 %	$2,827	16.4 %
Atlanta, GA	$380,542	14.2 %	$2,038	84.6 %	-16.4 %	$2,002	7.2 %
Boston, MA	$646,045	6.9 %	$3,457	69.0 %	-22.8 %	$2,806	10.1 %
San Francisco, CA	$1,369,586	1.9 %	$7,340	61.2 %	-23.1 %	$3,199	5.8 %
Detroit, MI	$239,563	6.9 %	$1,276	68.2 %	-9.3 %	$1,460	7.5 %
Riverside, CA	$571,380	8.3 %	$3,052	72.1 %	-11.0 %	$2,584	7.1 %
Phoenix, AZ	$449,590	6.4 %	$2,418	70.7 %	-13.7 %	$1,938	4.8 %
Seattle, WA	$757,177	7.9 %	$4,042	71.5 %	-28.5 %	$2,285	6.8 %
Minneapolis–St. Paul, MN	$371,658	5.6 %	$1,979	65.7 %	-20.7 %	$1,632	4.3 %
San Diego, CA	$876,288	7.6 %	$4,711	71.3 %	-13.1 %	$3,105	12.8 %
St. Louis, MO	$246,368	10.1 %	$1,308	72.0 %	-6.9 %	$1,273	9.8 %
Tampa, FL	$391,409	21.2 %	$2,090	94.0 %	1.3 %	$2,135	9.8 %
Baltimore, MD	$378,548	7.6 %	$2,014	68.4 %	-16.8 %	$1,798	4.1 %
Denver, CO	$621,003	8.0 %	$3,319	71.8 %	-26.0 %	$2,028	6.3 %
Pittsburgh, PA	$209,221	3.4 %	$1,117	62.4 %	-10.0 %	$1,338	6.6 %
Portland, OR	$562,754	5.4 %	$3,008	66.5 %	-23.0 %	$1,949	7.6 %
Charlotte, NC	$386,769	16.4 %	$2,072	86.9 %	-14.8 %	$1,824	10.4 %
Sacramento, CA	$590,167	4.4 %	$3,153	64.3 %	-18.6 %	$2,326	4.9 %
San Antonio, TX	$339,669	12.9 %	$1,818	80.2 %	-11.8 %	$1,518	6.0 %
Orlando, FL	$402,170	20.9 %	$2,148	94.0 %	-9.9 %	$2,045	11.7 %
Cincinnati, OH	$265,208	10.2 %	$1,412	73.3 %	-8.8 %	$1,505	11.5 %
Cleveland, OH	$219,237	9.7 %	$1,171	72.3 %	-5.9 %	$1,370	8.8 %
Kansas City, MO	$291,747	10.4 %	$1,548	73.6 %	-12.3 %	$1,364	11.0 %
Las Vegas, NV	$422,503	8.3 %	$2,304	77.6 %	-14.8 %	$1,832	1.6 %
Columbus, OH	$302,536	10.7 %	$1,622	76.4 %	-10.3 %	$1,509	9.0 %
Indianapolis, IN	$275,638	14.0 %	$1,466	80.9 %	-12.8 %	$1,483	10.4 %
San Jose, CA	$1,568,484	6.2 %	$8,287	65.8 %	-20.9 %	$3,341	8.3 %
Austin, TX	$541,125	2.3 %	$2,934	65.8 %	-22.9 %	$1,912	6.0 %
Virginia Beach, VA	$335,691	10.6 %	$1,786	73.7 %	-14.1 %	$1,648	5.3 %
Nashville, TN	$451,005	17.5 %	$2,420	90.2 %	-16.3 %	$1,906	9.5 %
Providence, RI	$449,220	8.4 %	$2,398	71.2 %	-14.7 %	$1,986	10.1 %
Milwaukee, WI	$271,085	8.5 %	$1,436	68.5 %	-12.6 %	$1,243	6.8 %
Jacksonville, FL	$378,695	19.8 %	$2,024	92.4 %	3.1 %	$1,810	8.3 %
Memphis, TN	$236,600	13.2 %	$1,261	80.4 %	-11.7 %	$1,501	7.6 %
Oklahoma City, OK	$223,762	13.5 %	$1,188	78.5 %	-1.0 %	$1,316	6.4 %
Louisville, KY	$244,522	9.2 %	$1,302	72.4 %	-9.1 %	$1,293	11.5 %
Hartford, CT	$324,546	10.3 %	$1,724	72.2 %	-4.2 %	$1,707	9.1 %
Richmond, VA	$344,784	11.9 %	$1,834	75.5 %	-16.8 %	$1,613	10.5 %
New Orleans, LA	$269,678	7.8 %	$1,442	70.6 %	-7.3 %	$1,527	6.8 %
Buffalo, NY	$244,383	8.1 %	$1,303	69.9 %	-8.9 %	$1,255	8.3 %
Raleigh, NC	$445,853	13.7 %	$2,396	84.5 %	-21.0 %	$1,793	9.5 %
Birmingham, AL	$250,650	11.9 %	$1,335	76.6 %	-9.7 %	$1,326	7.7 %
Salt Lake City, UT	$583,074	6.1 %	$3,110	69.0 %	-16.1 %	$1,764	10.6 %

*Table ordered by market size

¹The 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 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.

Zillow Group's affiliates and subsidiaries include Zillow®; Zillow Premier Agent®; Zillow Home Loans™; Zillow Closing Services™; Trulia®; Out East®; StreetEasy®; HotPads®; and ShowingTime+™, which houses ShowingTime®, Bridge Interactive®, and dotloop®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

SOURCE Zillow