The typical U.S. home value saw a 1.4% increase from April to May, which is the strongest monthly growth since June of the previous year. This data suggests that the home shopping season is unusually active, although slightly less so than the past two springs. This growth is despite the challenges buyers are facing with affordability, with a lack of fresh options triggering bidding wars and resulting in high sale prices for the few listings available. As of May, the typical home value, according to the raw, non-seasonally-adjusted Zillow Home Value Index, was $346,856, an increase of 0.9% from one year ago.
The report also highlights some geographical trends. The largest monthly home value gains were seen in more affordable metro areas, primarily in the Midwest, with Columbus leading the way (2.2% monthly gain), followed by Cincinnati (2.2%), Detroit (2.1%), Richmond (2.1%), and Milwaukee (2.0%). On the other hand, the smallest gains were in Las Vegas (0.5%), New Orleans (0.6%), Phoenix (0.6%), Austin (0.6%), and San Antonio (0.7%).
A key challenge identified in the report is the lack of new listings, which has persisted for almost a year. There were 23% fewer new listings in May compared to the previous year. The report attributes this scarcity to high mortgage rates, which make it costly for homeowners to list their homes. The mortgage rate is the highest it has been since November, standing at 6.8% at the time of the report, up from 5.1% a year ago and 3.0% two years ago.
Total active inventory in May was down 3.1% from the previous year and a significant 45.7% below May 2019 levels. Despite this, buyers persevered in May, with newly pending listings climbing 9.5% from April. This trend has led to a steady improvement, with the year-over-year decline shrinking to 18% in May, down from a 21% dip in April and a 24% dip in March.
Recommendations
Based on this analysis, it is clear that the U.S. housing market is facing several challenges, including a lack of new listings and high home values that are creating affordability issues for buyers. To address these challenges, it is recommended that:
- Buyers consider looking into more affordable metro areas, such as those in the Midwest, which are currently seeing the largest monthly home value gains.
- Policy makers should look into ways to incentivize homeowners to list their homes, such as tax breaks or subsidies for those who sell their homes.
Real estate agents can face difficulties in a low inventory market, but there are strategies they can employ to succeed. It’s important to stay up-to-date on the market, prioritize listings, work with buyers, build relationships with other agents, be innovative with financing options and use cutting-edge technologies to stand out during the listing presentation, and focus on cultivating long-term relationships with clients. By implementing these tactics, agents can thrive even in challenging market conditions. Overwhelmed and looking for some help? Listing3D has got you covered. Schedule a demo with us.
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