Home values took an uncharacteristic step down in September, albeit a small one, according to the latest Zillow® market report1. Competition is easing faster than normal this fall as buyers contend with the highest mortgage rates in more than 22 years.
“Mortgage rates approaching 8% are taking the wind out of the market’s sails, pushing monthly mortgage payments beyond many buyers’ budgets,” said Jeff Tucker, Zillow senior economist. “While attractive listings are still moving at a brisk clip, competition among buyers is fading quickly due to the shock of mortgage rates on top of normal autumn seasonality.”
Home values tick down
U.S. home values took a short step backward from August to September, falling 0.1%. That’s not nearly as pronounced as the 0.8% monthly decline seen in September 2022, but a step backward is still unusual for this time of year. Between 2015 and 2019, monthly growth in September hovered between 0.1% and 0.4%2.
The typical home value now stands at $350,091 nationally, up roughly 2% from this time last year. Of the 50 largest major metropolitan areas, 31 have home values higher than a year ago.
Affordability-based growth
The strongest annual home value appreciation is in relatively affordable markets, led by Hartford (up 11.1%), Milwaukee(8.5%), Providence (6.4%) and Virginia Beach (6.2%). The largest declines are in pandemic-era hot spots Austin (-10%), Las Vegas (-4.3%), Phoenix (-4.2%) and San Antonio (-2.5%), as well as New Orleans (-8.8%).
‘Rate lock’ abating?
A distinct lack of new inventory has troubled the market for more than a year. But some homeowners may not be able to delay sales any longer, potentially lessening the effect of “rate lock” on their decision. Rate lock refers to the incentive for existing homeowners not to sell, because their existing mortgages have lower interest rates than today’s prevailing rates.
Despite high and rising mortgage rates, the flow of new options for buyers is coming…
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