Nearly 23% of home sellers cut their home’s list price in January, according to Zillow.
That’s the highest share of any January since Zillow began tracking the metric.
Because inventory has increased in most markets, and affordability remains low due to higher mortgage rates, buyers had more negotiating power than in any January over the past five years, the firm says.
Competition was fiercest in the San Francisco Bay Area and the coastal Northeast.
Though competition varies greatly by region, most buyers in the market today have a good chance of seeing a price cut on their saved listing, Zillow says.
“Homeowners are finally coming back to the market as the effects of rate lock ease over time, but buyers are still struggling with high monthly costs,” says Skylar Olsen, chief economist for Zillow. “Sellers are in a good position, and are willing to make price cuts to close a deal. Home equity is near record highs, and the general economy and financial markets are surprisingly strong. Homes are selling faster than they did before the pandemic.”
Home values are up 44% compared to before the pandemic and have risen 2.6% year over year. There are wide differences in annual appreciation throughout the country, ranging from an 8.1% rise in San Jose to a 3.4% drop in Austin.
Mortgage rates ticked up to 7.04% in January, the highest level since May and significantly higher than the mid-6% rates seen in January last year. That gave buyers facing affordability challenges stronger headwinds in closing the deal — newly pending sales fell 3.6% year over year.
New listings hitting the market from existing owners in January increased nearly 12% year-over-year.
The hold of “rate lock” is weakening over time as homeowners rack up equity and encounter pressing reasons to sell.
Zillow surveys of recent sellers show 78% were influenced by life events to make their decision to sell, such as landing a new job or a change in family size.
Still, the pace of home sales remains sluggish due to higher mortgage rates and high home prices. As a result, it is likely that home sales will remain muted through this spring, even as more inventory comes online.
Photo: Blake Wheeler