Homes for sale keep getting more expensive, but rising costs aren’t deterring enough buyers to slow things down — for now, at least.
New data from Zillow shows that despite soaring prices (up more than 20% over the past year) and surging mortgage rates (which have pushed the typical monthly mortgage payment 52% higher than last year), the U.S. housing market is as cutthroat as it’s ever been.
On the surface, you might expect high prices and rising rates to push some buyers out of the market and make home shopping easier for those remaining. But competition is actually heating up. The typical home for sale in April went into contract in just seven days, according to Zillow. (In April 2019, it took 24 days for an offer to be accepted on a typical home.) A recent report from Redfin suggested that the increasing pace of home sales is due to buyers “rushing to snag homes before they become even more expensive.”
And it’s not only that homes are selling faster than before. They’re also selling above their asking prices — a sign, Zillow says, that buyers are attempting to outbid competition. Of the homes that sold in March, 48% went for more than the listing price. That's up from March 2019, when 37.5% of homes sold for over asking price.
Lawrence Yun, chief economist for the National Association of Realtors, called the current housing situation “quite unusual” in a Tuesday news release. “Sales are coming down,” he said, “but listed homes are still selling swiftly, and home prices are much higher than a year ago.”
That's bad news for hopeful buyers, at least in the short term.
“With bidding wars continuing to drive up prices on limited inventory,” Zillow economist Nicole Bachaud said in a news release, “those in the market today likely won't feel much relief."
Will the market ever cool off?
Though competition is stiff today, experts are seeing some signs that a cooldown is around the corner. More sellers are beginning to drop their asking prices, and inventory is rising, according to Zillow data. Existing home sales fell 2.4% between March and April, according to NAR. That’s the third straight month of declines.
Yun said he expects more declines in buyer activity in the months to come. Eventually, it’s likely that rising costs will deter enough buyers to bring prices back down to Earth.
“But,” Zillow’s Bachaud said, “we have not yet reached that point."
If you're a prospective buyer planning to wade into the market this spring, there are steps you can take to make the process as painless as possible. With mortgage rates rising across the board, for instance, it's smart to get quotes from multiple lenders to make sure you're getting the best possible rate. It's also a good idea to show sellers that you're serious by getting pre-approved for a mortgage before you start your search. Read our spring 2022 homebuying guide here.