This year’s housing market has been filled with its share of surprises, as conditions have transitioned out of their pandemic-induced frenzy and into what forecasters claimed would return to seasonality.
While part of those predictions called for the surging price growth of the past two years to slow, new data from Zillow suggests that home values declined slightly from June to July—arguably an event no one expected at the start of 2022.
In its latest market report, Zillow researchers found that the typical U.S. home value declined by $366, or 0.1%, in July, bringing the price tag down to $357,107, based on the raw Zillow Home Value Index (ZHVI).
That marks the first monthly dip since 2012, according to Zillow experts, who indicate that monthly growth in value had gradually decelerated since April 2022, when index growth peaked at 1.9%.
As the market rebalances, the report indicates that competition for homes is dwindling amid increased affordability hurdles plaguing buyers that are shutting many out of the housing market.
The most significant monthly home value declines were in San Jose and San Francisco, with a 4.5% and 2.8% dip, respectively. Phoenix and Austin were popular locations during the pandemic but saw values dip by 2.8% and 2.7%, respectively.
The cost of U.S. rent has also begun to stabilize after several months of rapid growth. Rent hikes eased to 0.6% month-over-month growth in July, with the typical monthly rent coming in at $2,031.
Homebuyers still on the hunt for a home have gained more time to search and consider their options as listings’ median days to pending jumped by two days in July to 10 days. While the report notes that it is nearly two weeks less than in July 2019, the additional time offers buyers a better chance of seeing price cuts.
Zillow data shows that housing stock is up 5.1% monthly while new inventory fell 13.6% month-over-month in July. While total inventory rises quickly, it still stands 43.5% below July 2019.
Key highlights:
- S. home values fell 0.1% from June to July, the first decline in the raw Zillow Home Value Index since 2012.
- Home values fell last month in 30 of the 50 largest metro areas but are still up 16% from a year ago.
- Rising inventory is due to homes lingering on the market and new listings trailing pre-pandemic levels.
- It took 10 days for a listing to go pending in July, two days longer than in June.
- Rent appreciation is slowing, but the growth rate remains much higher than pre-pandemic levels.
The takeaway:
“Home values flattening so quickly after recent record growth might surprise, but it’s a badly needed rebalancing that gives homebuyers more options, more time to shop and more negotiating power,” said Zillow chief economist Skylar Olsen. “This slowdown is about discouraged buyers pulling back after the affordability shock from higher rates. As prices soften, many will renew their interest, and we will continue our progress back to ‘normal.’ With buyers ready in the wings once confidence returns, homeowners can expect to keep the majority of the equity gains they’ve seen in the last two years.
“Inventory, the pool of homes available during a given window, is very responsive to easing demand and slowing sales, this year posting the largest month-over-month seasonal increases for any May, June or July ever recorded. The flow of homes into the market, however, is slowing. High interest rates are likely keeping current homeowners from deciding to list as they compare their current rate—and home—against what can be found on the market, keeping inventory far below pre-pandemic norms despite the slowdown in sales,” added Olsen.
