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The housing market seems to be showing some signs of hope for potential buyers. The Freddie Mac Primary Mortgage Market Survey put this week’s 30-year fixed rate at 6.49%, which is a positive trend in the right direction. This may be temporary, but it's already spurred buyers into action. The Mortgage Bankers Association reported that mortgage applications jumped by nearly 17% last week.
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July's Housing Market Report from Zillow mirrors what we've seen from other outlets – a tale of cautious and frustrated buyers and price-anchored sellers facing off in a stalemate. Each month, Zillow calculates what it calls a heat index. This uses three key listing-based metric inputs: engagement on Zillow's active home listings, the share of listings with a price cut, and the share of for-sale listings going pending in 21 days. It ranks markets on a scale from 0 to 100, from a strong buyer's market to a strong seller's market. Currently, Zillow says we have a neutral market. That means that neither the buyer nor the seller has a strong advantage, but that sellers have lost the upper hand. This is the first time Zillow has seen a neutral market in July since, 2019, and it may indicate that we are heading into a market shift.
In early July, in an interview with the Washington Journal, Lawrence Yun, Chief Economist for the National Association of Realtors, called the current housing market bizarre, noting that home sales last year were at 30-year lows and sales this year are trending below that level. However, he did note that there is hope on the horizon, with inventory up 18% from last year. A similar trend was echoed by the Zillow report, which put inventory at 25% above last year's levels. The Zillow report shows that listings dropped 6.3% in July but were up 6% year over year. Inventory seems to be coming from new listings and homes staying on the market longer.
One key indicator of market health is the amount of time a home stays on the market. The longer a home is on the market, generally, the more likely it is that it will sell for below its original listing price. Sometimes, days on the market can indicate an overpriced home, but if days on the market are going up for an area, it usually indicates that prices as a whole are too high. Zillow's report showed that over 26% of homes on the market received a price cut.
Even though inventory is rising, it's still below what is considered a healthy market for buyers. If there are six months or more of existing home inventory, that puts the buyers in the driver's seat. One bright spot for sellers is that despite this shifting market, over 35% of homes sold over the listing price in July.
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What To Watch For Next
While mortgage changes may prompt buyers to begin looking again, it won't necessarily mean sellers will seize the same opportunity to move. Zillow's past surveys have found that life events impact sellers more than mortgage rates. A recent analysis by Realtor.com forecasts that the number of homes on the market may fall by 14% this year. A downshift in inventory may mean prices don't drop much.
Real estate agents traditionally talk about the three Ds of home selling: death, divorce, and downsizing, as being most likely to prompt a move. Sellers are staying in their homes longer than ever. The 2023 National Association of Realtors profile of homebuyers and sellers found that the typical seller was 60 years old and had lived in their home for at least 10 years.
The way to think about the market right now might be as a seesaw poised at the midpoint. Lower mortgage rates will push buyers into the market, but if there isn't enough inventory at prices they can afford, they will likely leave frustrated. Although Zillow says sellers may have lost the upper hand, the real control may still rest with owners deciding if it is time to sell.
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This article Zillow Says Home Sellers Have 'Lost The Upper Hand' originally appeared on Benzinga.com