The housing market is as competitive as ever despite 53% rise in mortgage costs

News provided by

May 19, 2022, 08:00 ET

There are signs a market rebalancing could be around the corner, but for now, the market is moving at record speed

U.S. home values continue to grow at a record pace, up 20.9% in the past year. The combination of rising prices and a spike in mortgage rates means the monthly mortgage payment on a typical home is 52.5% higher than it would have been a year ago.
Rising costs have not yet eased competition. Homes are selling as fast as they ever have — after only seven days for the typical home — and nearly half of homes are selling for above their list price.
There are faint signs the market is starting to rebalance, including growing inventory and a rise in listings with a price cut.

SEATTLE, May 19, 2022 /PRNewswire/ -- The housing market is as competitive as ever, according to the latest Zillow® Real Estate Market Report.ⁱ Buyer demand has been strong enough to keep the market moving at a record pace, even after a massive spike in mortgage rates.

Zillow logo (PRNewsfoto/Zillow Group)

Year-over-year home value growth set a record for the 13th consecutive month in April. The typical U.S. home is worth $344,141, 20.9% higher than a year ago. That record pace of growth comes despite rising mortgage rates eating away at what home buyers can afford. The monthly mortgage payment on the typical U.S. home is 11.7% higher than it would have been in March, and 52.5% higher than a year ago, assuming a 30-year mortgage with a 20% down payment.ⁱⁱ

"We do expect the market to begin rebalancing this spring as rising costs keep enough would-be buyers on the sidelines for inventory to begin catching up with demand, but we have not yet reached that point," said Nicole Bachaud, Zillow economist. "Nearly half of homes are selling above their list price, and April sales happened as fast as we've ever recorded. It may very well be that fewer people are trying to buy, but with bidding wars continuing to drive up prices on limited inventory, those in the market today likely won't feel much relief."

To keep monthly mortgage costs the same as they would have been a year ago, today's buyers must shop in a different price range. According to estimates from Zillow's mortgage calculator, a buyer who can afford a monthly mortgage payment of $1,500 could have paid roughly $340,000 for a house a year ago, when mortgage rates were much lower. Today, that $1,500 monthly payment could buy a house worth about $275,000. And that is before factoring in home value growth of more than 20% during that time; a buyer would have paid about $227,500 a year ago for that $275,000 home.ⁱⁱⁱ

Rising costs have not yet eased competition. Homes that sold in April typically went pending after only seven days, tying a monthly record set last May and June. To put that remarkable market speed into perspective, in April 2019, the last spring before the pandemic, the typical home sat on the market for 24 days before an offer was accepted.

Nearly half (48%) of homes that were purchased in March — the latest data available — sold for more than the asking price, indicating the buyer expected multiple bidders. That's up from 37.5% in March 2021. More than three-quarters of homes are selling above list price in the country's most competitive markets: San Francisco (80.4%), Seattle (77.3%) and San Jose (76.1%).

Faint signs are starting to emerge that a more balanced market is around the corner. The share of listings with a price cut crept up to 9.1%, higher than 8.6% in March and 7.8% last April. That may be a sign that sellers cannot be quite as ambitious in their pricing strategy as they could have been in recent months.

Inventory continues to rise as well, up 5.5% from March — the second straight month of growth. The year-over-year inventory deficit has also shrunk in each of the past three months, now sitting at -19.5%.

More inventory is both the consequence and the cause of a more balanced housing market: It limits the number of buyers bidding on each home as there are more to choose from, and it prompts sellers to price their home competitively.

Zillow's home value forecast now calls for 11.6% growth through April 2023, down from a year-ahead forecast of 14.9% made in March. Zillow's forecast for existing home sales has been lowered as well, now predicting 5.73 million sales in 2022. That would mark a 6.4% decrease from 2021. Spiking mortgage rates, inventory gains, and lower-than-expected pending home sales and mortgage application data drove the downward revision.

These downwardly revised projections would still represent a very strong housing market in the coming year. Other than this recent run of record-breaking home value growth, only during a short stretch in 2005 have home values grown faster than 11.6% annually in the history of the Zillow Home Value Index. And while 5.73 million existing home sales would be a decrease from a remarkably strong 2021, that would mark the second-best calendar year total since 2006.

The pace of annual rent growth slowed for the second consecutive month. Rents are up 16.4% year over year, down from 17% annual growth in March. The typical U.S. rental unit costs $1,927 a month.

Metropolitan Area*	Zillow Home Value Index (ZHVI)	ZHVI YoY Change	Monthly Mortgage Payment on a Typical Home**	Monthly Mortgage Payment on a Typical Home YoY Change	Median Days to Pending	Share of Homes Sold Above List (March 2022)	Zillow Observed Rent Index (ZORI)	ZORI YoY Change
United States	$344,141	20.9%	$1,475	52.5%	7	48.0%	$1,927	16.4%
New York, NY	$600,354	12.7%	$2,573	42.2%	22	46.7%	$3,004	20.5%
Los Angeles, CA	$932,783	20.9%	$3,998	52.4%	10	69.9%	$2,864	16.1%
Chicago, IL	$305,282	14.3%	$1,308	44.1%	7	36.7%	$1,883	11.4%
Dallas–Fort Worth, TX	$381,089	30.1%	$1,633	64.1%	8	63.0%	$1,750	17.9%
Philadelphia, PA	$327,347	13.7%	$1,403	43.4%	7	45.7%	$1,822	11.6%
Houston, TX	$299,998	22.5%	$1,286	54.5%	8	41.3%	$1,550	12.6%
Washington, DC	$550,917	11.0%	$2,361	39.9%	5	54.8%	$2,174	12.2%
Miami–Fort Lauderdale, FL	$430,068	28.1%	$1,843	61.6%	12	31.2%	$2,846	31.7%
Atlanta, GA	$367,946	30.4%	$1,577	64.4%	6	54.4%	$1,904	17.4%
Boston, MA	$649,034	15.1%	$2,782	45.1%	6	62.5%	$2,762	12.0%
San Francisco, CA	$1,489,691	20.1%	$6,385	51.5%	9	80.4%	$3,157	10.4%
Detroit, MI	$238,278	15.3%	$1,021	45.4%	5	45.5%	$1,405	11.2%
Riverside, CA	$578,174	27.6%	$2,478	60.9%	9	62.7%	$2,584	16.9%
Phoenix, AZ	$466,170	30.9%	$1,998	65.1%	7	50.5%	$1,911	21.6%
Seattle, WA	$791,933	25.7%	$3,394	58.5%	5	77.3%	$2,206	16.0%
Minneapolis–St. Paul, MN	$374,074	12.7%	$1,603	42.1%	8	53.8%	$1,624	6.6%
San Diego, CA	$923,350	28.0%	$3,957	61.4%	7	70.2%	$2,946	20.0%
St. Louis, MO	$239,028	15.3%	$1,024	45.4%	5	51.5%	$1,263	11.0%
Tampa, FL	$366,059	35.1%	$1,569	70.3%	5	48.0%	$2,055	26.9%
Baltimore, MD	$372,061	11.4%	$1,595	40.4%	5	46.9%	$1,776	10.7%
Denver, CO	$639,316	24.6%	$2,740	57.2%	5	69.5%	$1,940	15.1%
Pittsburgh, PA	$211,973	14.2%	$909	44.0%	8	33.7%	$1,323	8.1%
Portland, OR	$581,400	19.3%	$2,492	50.4%	5	62.7%	$1,821	12.6%
Charlotte, NC	$372,300	30.8%	$1,596	64.9%	4	57.8%	$1,738	17.4%
Sacramento, CA	$616,124	21.8%	$2,641	53.6%	7	67.3%	$2,233	12.3%
San Antonio, TX	$329,532	25.5%	$1,412	58.2%	7	49.8%	$1,441	15.3%
Orlando, FL	$376,474	31.7%	$1,614	66.1%	5	45.1%	$1,999	23.7%
Cincinnati, OH	$255,392	15.5%	$1,095	45.7%	3	44.4%	$1,412	11.3%
Cleveland, OH	$212,605	15.9%	$911	46.2%	5	45.0%	$1,344	11.3%
Kansas City, MO	$283,085	16.2%	$1,213	46.5%	3	53.7%	$1,338	11.1%
Las Vegas, NV	$437,478	33.3%	$1,875	68.1%	6	50.6%	$1,851	21.3%
Columbus, OH	$290,400	17.1%	$1,245	47.7%	3	58.2%	$1,430	12.2%
Indianapolis, IN	$263,495	20.5%	$1,129	52.0%	4	48.2%	$1,457	13.7%
San Jose, CA	$1,710,404	25.2%	$7,331	57.8%	8	76.1%	$3,199	12.4%
Austin, TX	$594,441	37.6%	$2,548	73.6%	11	61.7%	$1,823	20.0%
Virginia Beach, VA	$317,835	14.4%	$1,362	44.2%	13	57.1%	$1,584	12.3%
Nashville, TN	$433,158	32.8%	$1,857	67.5%	4	55.2%	$1,802	18.9%
Providence, RI	$438,168	16.8%	$1,878	47.2%	7	59.1%	$1,900	15.0%
Milwaukee, WI	$267,887	12.0%	$1,148	41.3%	22	55.2%	$1,242	7.3%
Jacksonville, FL	$355,286	32.4%	$1,523	67.0%	5	43.4%	$1,748	20.4%
Memphis, TN	$224,616	21.2%	$963	52.8%	9	49.6%	$1,526	14.2%
Oklahoma City, OK	$210,799	18.2%	$903	49.0%	4	45.5%	$1,318	12.3%
Louisville, KY	$236,137	14.1%	$1,012	43.9%	5	34.3%	$1,274	11.2%
Hartford, CT	$312,123	14.5%	$1,338	44.4%	6	59.5%	$1,590	11.3%
Richmond, VA	$320,654	13.2%	$1,374	42.8%	5	63.1%	$1,539	13.4%
New Orleans, LA	$264,185	14.2%	$1,132	44.0%	6	34.2%	$1,503	16.9%
Buffalo, NY	$241,651	18.8%	$1,036	49.8%	9	63.3%	$1,232	9.9%
Raleigh, NC	$445,219	36.4%	$1,908	72.0%	4	70.2%	$1,706	17.7%
Birmingham, AL	$234,645	17.7%	$1,006	48.4%	7	54.5%	$1,302	11.5%
Salt Lake City, UT	$602,765	28.8%	$2,583	62.4%	5	66.6%	$1,646	19.1%

*Table ordered by market size

**Principal and interest only, assuming a 30-year fixed-rate mortgage with a 20% down payment

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®, ShowingTime®, Bridge Interactive®, dotloop®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

ⁱ 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. The data in the Zillow Real Estate Market Report is aggregated from public sources by a number of data providers for 931 metropolitan and micropolitan areas, dating back to 2000. All current monthly data at the national, state, metro, city, ZIP code and neighborhood levels can be accessed at www.zillow.com/research/data.

ⁱⁱ Principal and interest only. Property taxes, homeowners insurance and other additional costs are not included.

ⁱⁱⁱ Estimated monthly mortgage payments in this example assume a 20% down payment, a property tax rate of 0.88%, annual home insurance costs of $1,260 and no HOA dues. Freddie Mac Primary Mortgage Market Survey data were used to estimate prevailing mortgage rates during each period.

SOURCE Zillow