Home sellers are returning to the market, but they’re finding buyers hesitating, according to the latest Zillow market report. New listings of houses outpaced sales in May, allowing buyer competition and price growth to cool — and further price relief is in the forecast. But in Phoenix, where the May Zillow Home Value Index hit $461,390, a year-over-year increase of 4.2%, experts say it’s still a sellers’ market.

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“Rate lock’s hold seems to be loosening — homeowners who may have put off listing their homes are done waiting. But just as more choices sprang up for sale, buyers turned on cruise control,” said Orphe Divounguy, Zillow senior economist. “Inflation has hit younger households hardest, and stubbornly high rates have pushed a mortgage out of reach for many first-time buyers. That has cooled competition for houses. If these trends hold, we’re likely to see price growth flatten or tick down over the next year.”

Inventory infusion

New listings from sellers took a larger-than-average step up, rising 8% from April to May, and now stands 13% above last year’s extremely low level. The effects of “rate lock” — when owners hold onto their existing homes and low-rate mortgages — are weakening over time. A Zillow survey of recent sellers found a large majority (about 80%) were influenced by life events, such as getting married or having a child, and not necessarily by optimal financial conditions. 

But buyers aren’t matching sellers’ enthusiasm; sales in May were 6% lower than last year.2 This helped partially restock the housing shelves, with the number of homes on the market rising 22% compared to last year’s near record-low level. Inventory is still 34% below pre-pandemic norms, but that’s the smallest deficit in more than three years. 

New listings rose the most annually on the West Coast and coastal South, in San Diego, Seattle, Charlotte, Raleigh and the San Francisco Bay Area. Compared to last year, total inventory accumulated the most in major Florida markets, where strong new construction has helped refill the coffers. Buyers saw more listings month over month in every major market except Miami. 

Competition and appreciation ease

As a result, competition among buyers eased in May, and home price appreciation cooled with it. Growth in typical home values slowed from 4.4% year over year in April to 3.9% in May — still a healthy, normal rate — while monthly appreciation ticked down from 1.2% in April to 0.8% in May. Home values are still up significantly — more than 45% — since before the pandemic. 

Prices have fallen year over year in New Orleans, Austin and San Antonio, while appreciation is strongest in the Northeast and coastal California.

Renters struggling to save up for a down payment may get a slight reprieve in the coming year. Zillow forecasts home values will end 2024 up 0.4% on the year, and tick down 1.4% through May 2025. 

What it means for buyers and sellers

Zillow’s market heat index shows the nation is becoming a bit friendlier for buyers and is headed toward “neutral” territory, but sellers still hold a slight advantage. Buffalo, Hartford and San Jose are the top markets for sellers among the 50 largest metro areas. New Orleans, Miami, Jacksonville and Memphis are all tilted toward buyers, giving those in the market better leverage in negotiations.  

Nationwide, nearly one-quarter of all homes for sale received a price cut in May, the highest share in the past six years for this time of year. There’s a good chance that buyers can purchase a lingering property for less than list price. This environment makes experienced agents all the more valuable for both buyers and sellers, to find and negotiate deals for buyers, and to price and market properties correctly for sellers.  

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