Competition for homes and price appreciation tapered off faster than normal in July as high housing costs continued to stymie shoppers, according to the Zillow market report. Sellers gave up a marked advantage over buyers in July in the Phoenix housing market and on the national scale, as the Zillow market heat index moved into neutral territory for the first time since December. But recent drops in mortgage rates should spur more competition as we head into fall. 

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“If this relief from mortgage rates continues, we should see more buyers restarting their hunt for a home,” said Zillow Chief Economist Skylar Olsen. “But although rate lock among homeowners is easing, they probably won’t be as motivated to jump back into the market and sell. With housing inventory still scarce, this improved affordability picture could reignite competition and sales as we head into the fall, or at least delay the usual post-summer cooldown.” 

Sellers lose the upper hand

Sellers gave up a marked advantage over buyers in July on the national scale, as the Zillow market heat index moved into neutral territory for the first time since December. This marks the first July the national market has been neutral since 2019; in each of the past two years, the market moved into neutral ground in October. 

Among major markets, Denver, Pittsburgh, Indianapolis and Louisville lost their advantage for sellers and moved into neutral territory, while Orlando became buyer-friendly like the rest of the big Florida metros.

Homes are lingering on the market — even successful listings took almost a week longer to sell in July than last year. While that’s still five days faster than the average pace of sales in the years before the pandemic, it’s still a sign that buyers were much less eager to commit.

Inventory accumulated further in July, and now stands nearly 25% above last year’s levels, marking the eighth straight month the year-over-year inventory gap has widened. Compared to pre-pandemic norms, the inventory shortfall shrank a bit and is now down 31.5%, the smallest deficit since October 2020. 

In an effort to win over cash-strapped buyers, home sellers again cut prices at record levels. More than 26% of homes on Zillow received a price cut in July, the highest share for any July since at least 2018, when the dataset began. 

What happens next? 

This cooling competition and pricing slowdown could dissipate in August if lower mortgage rates hold. 

By the end of July, lower rates brought the monthly price premium to buy a home, rather than rent a similar property, below $200.3 That has shrunk from a $247 difference as recently as April. Now lower rates in August are closing the gap even further. 

Of course, the cost disparity between renting and buying differs in every metro and even by neighborhood. But for those shoppers on the edge of affordability — and who have enough cash on hand for a down payment — the significant drop in rates may offer enough relief to entice a move. The effect of a rate cut on mortgage payments is more significant in expensive areas.

Lower rates aren’t likely to encourage a comparable wave of current homeowners to sell, though. Zillow surveys show 80% of recent sellers were influenced by major life events, such as a change in their household size or working situation. New listings typically surge in spring and then taper off as homeowners aim to sell, buy another house, and be moved in before school and the fall holidays begin. 

Home value appreciation slowed to a refreshingly reasonable 2.8% year over year in July, but that could tick back up if the surge in demand outweighs an increase in supply, as expected. 

Metropolitan
Area*		July Zillow
Home
Value
Index
(ZHVI)
(Raw)		ZHVI
Change,
Month
over
Month
(MoM)		ZHVI
Change
Since
Before
the
Pandemic		Market
Favors**		Share
of
Listings
With a
Price
Cut		Inventory
Change
Since
Before
the
Pandemic		Typical
Mortgage
Payment*** 
United States$362,1560.3 %46.6 %Neutral26.3 %-31.5 %$1,900
New York, NY$675,0440.9 %34.1 %Strong
seller		14.4 %-52.6 %$3,522
Los Angeles, CA$967,9440.3 %43.8 %Seller20.7 %-32.6 %$5,029
Chicago, IL$328,2390.7 %38.1 %Seller25.4 %-51.7 %$1,718
Dallas, TX$378,091-0.1 %46.9 %Neutral37.5 %-11.3 %$1,985
Houston, TX$310,9980.1 %39.2 %Neutral28.8 %-17.3 %$1,632
Washington, DC$568,1110.0 %31.1 %Strong
seller		23.2 %-44.6 %$2,975
Philadelphia, PA$365,8740.4 %45.5 %Seller22.9 %-49.8 %$1,918
Miami, FL$492,1570.2 %62.4 %Buyer23.2 %-13.9 %$2,580
Atlanta, GA$387,1040.1 %57.0 %Neutral31.9 %-16.8 %$2,031
Boston, MA$706,5980.5 %44.4 %Strong
seller		19.6 %-42.1 %$3,697
Phoenix, AZ$457,842-0.3 %52.4 %Neutral34.3 %-23.1 %$2,406
San Francisco, CA$1,178,102-0.2 %25.3 %Strong
seller		19.7 %-5.6 %$6,157
Riverside, CA$588,0970.3 %53.3 %Seller23.5 %-33.8 %$3,075
Detroit, MI$255,6200.4 %42.3 %Seller24.6 %-40.1 %$1,342
Seattle, WA$747,883-0.1 %45.0 %Seller28.7 %-26.2 %$3,913
Minneapolis, MN$377,2290.2 %28.3 %Strong
seller		26.5 %-37.4 %$1,983
San Diego, CA$953,488-0.2 %56.8 %Seller27.9 %-39.2 %$4,994
Tampa, FL$380,626-0.1 %61.6 %Buyer32.7 %29.0 %$2,003
Denver, CO$590,525-0.1 %35.9 %Neutral38.2 %-3.8 %$3,092
Baltimore, MD$387,5570.1 %31.9 %Seller25.7 %-50.7 %$2,037
St. Louis, MO$255,5160.4 %42.2 %Strong
seller		23.0 %-48.6 %$1,337
Orlando, FL$399,6900.2 %55.0 %Buyer29.1 %25.3 %$2,097
Charlotte, NC$385,3920.1 %59.8 %Neutral28.0 %-6.8 %$2,024
San Antonio, TX$287,892-0.1 %34.7 %Neutral34.5 %10.8 %$1,514
Portland, OR$553,3630.1 %32.8 %Seller30.5 %-24.9 %$2,899
Sacramento, CA$587,2380.2 %35.1 %Seller28.5 %-34.7 %$3,077
Pittsburgh, PA$215,714-0.2 %34.9 %Neutral28.7 %-43.9 %$1,136
Cincinnati, OH$289,3620.5 %49.7 %Seller29.1 %-42.1 %$1,514
Austin, TX$459,270-0.4 %41.7 %Buyer32.6 %33.9 %$2,415
Las Vegas, NV$434,5690.6 %46.1 %Seller27.2 %-32.6 %$2,269
Kansas City, MO$307,8360.3 %47.3 %Seller29.6 %-45.7 %$1,612
Columbus, OH$316,7240.4 %51.4 %Seller31.7 %-31.3 %$1,660
Indianapolis, IN$283,2980.3 %52.2 %Neutral33.1 %-24.3 %$1,486
Cleveland, OH$234,1780.8 %49.8 %Strong
seller		23.5 %-58.6 %$1,224
San Jose, CA$1,613,123-0.4 %42.0 %Strong
seller		17.3 %-24.5 %$8,317
Nashville, TN$444,8110.1 %49.3 %Neutral36.8 %-15.1 %$2,335
Virginia Beach, VA$353,7040.3 %42.4 %Seller24.4 %-51.2 %$1,851
Providence, RI$492,4051.0 %55.1 %Strong
seller		19.7 %-61.0 %$2,568
Jacksonville, FL$360,3400.0 %52.5 %Buyer33.2 %4.6 %$1,896
Milwaukee, WI$351,1050.5 %44.9 %Seller16.4 %-32.6 %$1,841
Oklahoma City, OK$236,8850.2 %43.8 %Neutral31.2 %-17.7 %$1,243
Raleigh, NC$446,7040.0 %53.8 %Seller36.0 %-21.4 %$2,345
Memphis, TN$241,340-0.1 %46.9 %Buyer29.4 %1.6 %$1,269
Richmond, VA$373,3330.3 %48.5 %Strong
seller		25.4 %-45.9 %$1,956
Louisville, KY$261,2460.5 %38.7 %Neutral28.9 %-34.0 %$1,367
New Orleans, LA$245,1340.4 %5.3 %Buyer26.4 %38.3 %$1,293
Salt Lake City, UT$545,852-0.1 %46.4 %Seller33.3 %-20.1 %$2,864
Hartford, CT$368,3510.9 %59.7 %Strong
seller		16.5 %-67.2 %$1,927
Buffalo, NY$267,0200.9 %55.2 %Strong
seller		19.7 %-43.7 %$1,400
Birmingham, AL$254,6130.1 %38.2 %Neutral26.0 %-27.5 %$1,339
*Table ordered by market size 
**According to Zillow’s market heat index
*** Mortgage payment, excluding taxes and insurance, for a house valued at the Zillow Home Value Index for that location, bought at the average mortgage rate for July (6.85%), using a 20% down payment.