Buyers are getting some much-needed relief and more homeowners appear to be breaking free from “rate lock.” But competition for homes is still relatively stiff, despite improvements in inventory and rates.  Compared to pre-pandemic levels, homes are moving about 50% faster and for a higher price.

Home buyers are finding significant savings as mortgage rates fell from 23-year highs in October. But as we’ve seen in recent weeks, mortgage rates are fickle things. They’ll play a massive role determining appreciation and affordability – especially for first-time buyers – going forward in 2024. Fortunately, rate lock appears to be wearing off for some homeowners, who show encouraging signs that they’re ready to come back to the market.

20% of homeowners are now considering selling their homes within the next three years due to moderating mortgage rates, according to Zillow’s latest market update. That’s up from 15% a year ago. The survey, fielded in Q4 of 2023, also found that the share of homeowners considering selling was almost the same whether they had a mortgage rate above or below 5%. That’s a big change from six months ago, when homeowners with rates above 5% were nearly twice as likely to consider selling. 

Here are the other key stats from their December report.

• The typical home in the US is now $344,000

• The typical monthly mortgage payment, assuming 20% down, is now $1,790

• New listings have increased by 2.1% YOY

• Active listings are up 0.6% YoY

• Inventory fell YoY in 33 of 50 major markets, most notably in Las Vegas (-35.2%), Seattle (-26.9%) and Sacramento (-25%)

Our Take

It is truly amazing what a small drop in mortgage rates can do for buyers motivation. Buyers are getting off the sidelines, and even some homeowners are jumping in. This seemed like a far-away scenario last year when rates were higher. We’re not saying that market conditions are ideal, or that the lock-in effect has stopped being a factor, but that the conditions are good enough and we hope they keep getting better!