Price Reductions Hit A 6-Year High In May

Sellers Return to the Market Amid Buyer Hesitation

The latest market report from Zillow reveals a shift in the real estate landscape as home sellers make a strong comeback. However, buyers appear more hesitant, leading to a cooling in buyer competition and price growth.

In May, new listings from sellers surged, outpacing sales and allowing the housing market to experience some much-needed inventory relief. New listings rose by 8% from April to May and are now 13% above last year’s extremely low levels. According to Zillow senior economist Orphe Divounguy, "Rate lock's hold seems to be loosening — homeowners who may have put off listing their homes are done waiting. But just as more choices sprang up for sale, buyers turned on cruise control." This increased supply has been influenced by life events such as marriage or childbirth, rather than optimal financial conditions.

Inventory Infusion

The increase in new listings has led to a partial restocking of the housing inventory, with the number of homes on the market rising by 22% compared to last year's near-record-low levels. Despite this improvement, inventory is still 34% below pre-pandemic norms, marking the smallest deficit in over three years. Significant annual increases in new listings were observed on the West Coast and coastal South, particularly in San Diego, Seattle, Charlotte, Raleigh, and the San Francisco Bay Area. Major Florida markets also saw considerable inventory accumulation, thanks to robust new construction efforts.

Cooling Competition and Appreciation

With more homes available, competition among buyers has eased, leading to a slowdown in home price appreciation. Typical home value growth slowed from 4.4% year-over-year in April to 3.9% in May, while monthly appreciation decreased from 1.2% in April to 0.8% in May. Despite this cooling, home values remain significantly higher than pre-pandemic levels, with a cumulative increase of more than 45%.

However, some markets are experiencing price declines. New Orleans, Austin, and San Antonio have seen year-over-year price drops, while appreciation remains strongest in the Northeast and coastal California. Zillow forecasts a modest increase in home values by the end of 2024, with a slight decline of 1.4% through May 2025.

Market Dynamics for Buyers and Sellers

Zillow’s market heat index indicates a shift toward a more balanced market, though sellers still maintain a slight advantage. The top markets for sellers include Buffalo, Hartford, and San Jose, while New Orleans, Miami, Jacksonville, and Memphis are more favorable for buyers, providing better leverage in negotiations.

Nationwide, nearly one-quarter of homes for sale received a price cut in May, the highest share in six years for this time of year. This trend suggests that buyers might have opportunities to purchase properties below the list price. In this environment, experienced real estate agents are invaluable for both buyers and sellers. Agents can help buyers find and negotiate deals and assist sellers in pricing and marketing properties correctly.


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