The value of a typical American home dropped for the second straight month, down 0.3% from July to August in the largest monthly dip since 2011.
Zillow’s latest market report found that affordability is directing market declines, with lower-priced homes staying hotly competitive while expensive markets see drastic declines. The U.S. typical home value is now $356,054.
Areas that saw big gains during the pandemic are now susceptible to fast drops, losing their appreciation momentum from the Great Migration. Midwestern markets, which tend to be more affordable, remain hot, while Western markets are comparatively tanking.
Volatile mortgage rates are impacting these areas as borrowers find it increasingly hard to even qualify for a loan, let alone house-hunt.
“Substantial day-to-day and week-to-week rate movements mean that many potential buyers are able to qualify for a loan one week, but not the next, or vice versa,” said Skylar Olsen, chief economist at Zillow.
“Even buyers able to afford a house at current rates could feel frozen, waiting for mortgage rates to fall dramatically again, like they did from the end of June to mid-July, when rates dropped 50 basis points in just two weeks.”
She added that monthly mortgage payments now exceed the 30% housing-burdened threshold, making some buyers who could technically afford a loan wary of taking one on.
Appreciation has cooled since April, but values are still up 14.1% YOY and 43.8% since August 2019. Mortgage payments have increased from $897 in August 2019 to $1,643, a massive 83% hike.
Inventory did rise 1% from July, but it’s the smallest monthly increase since February.
Redfin’s metrics found that new listings were down 8% from July to August to their lowest level since May 2020 and, removing the pandemic from the equation, their lowest point since 2012.
“When mortgage rates were below 3%, sales and home prices soared. The market was like a game of musical chairs with buyers vying for too few homes,” said Redfin Chief Economist Daryl Fairweather.
“As mortgage rates approached 6%, almost everyone left the party. Now the market is more like a middle school dance where a small number of buyers and sellers are pairing up during a slow song.”
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