Buyer Demand Elevated Despite Affordability Concerns

Even as buying a home is getting more expensive by the day, stock shortages are spurring serious competition among the few buyers on the market.

New listings fell nearly 5% last month, according to Zillow’s latest market report. While inventory is slowly recovering – 5% is actually a smaller decline than seasonally expected – it is still the lowest number of listings in any October recorded by Zillow since 2018.

Still, there are good indicators for inventory. Listings were down 1.2% YOY, the smallest since May 2022, and are down 19% compared to pre-pandemic levels, much better than April’s -35%.

In fact, total inventory actually rose 2.6% from September to October, though this was due to a downturn in sales, not an influx of homes.

“As interest rates rose, some pent-up sellers appear to have been shaken free of waiting for rates to drop. New listings have nearly escaped the red annually and are trending out of a mortgage rate lock-induced hole,” said Skylar Olsen, Zillow chief economist. “A record number of households in prime home-buying ages are providing buyers, despite the headwinds.”

The main players in this drama are millennials struggling to find affordable first homes. The biggest living generation, they are contributing to strong demand despite the market’s challenges.

Their plight is creating conditions that “rhyme” with the 1980s when Baby Boomers flooded the market. Inflation and rates also skyrocketed in that time period, with rates reaching a peak of 18% in 1981. Existing home sales tanked and home prices surged, much like the last few years.

As a result, attractive listings are being snapped up fast. Homes sold in October typically were off the market in 16 days, one day longer than in September, but two days faster than last year and two weeks faster than in 2019.

More sales could be on the horizon as sellers continue slashing list prices. Rates also slipped in the last two weeks, retreating from near-8% levels and encouraging would-be buyers to move fast before they inflate again.