Sellers expanded their advantage in the housing market in July as market forces continued to work in their favor, according to the July Zillow® Real Estate Market Report. Buyers outnumber sellers and snapped up homes at a record pace last month. Meanwhile, the divide between the for-sale and rental markets widened as rent growth continued to slow.
The for-sale housing market has been red hot despite enormous job losses across the country, and home values have steadily climbed. The typical home value was $253,527 in July, up 4.5% year over year—the fastest pace since May 2019. Annual home value growth accelerated from June in 42 of the 50 largest U.S. metro areas, led by San Jose, Calif. (up 2.1 percentage points) and Hartford (up 0.8 percentage points). Homes sold in July typically went under contract after only 16 days, two days faster than the previous monthly low in Zillow data that dates back to January 2018.
Month-over-month home value growth jumped from 0.4% in June to 0.48% in July, the biggest one-month acceleration since May 2012, according to the report. Home values grew month over month in each of the top 50 metros after they fell in San Francisco and Detroit in June.
“This spring’s housing soft patch is receding in the rearview mirror as we get a clear picture of robust demand meeting remarkably low supply,” said Zillow economist Jeff Tucker. “Record-low mortgage rates and a record-high number of people in their early 30s are combining to fuel first-time buyer demand. Builders, acting on unprecedented confidence, are racing to meet demand, but supply remains well behind what’s needed. This lack of inventory, along with forbearance terms keeping unemployed homeowners in their homes, stands in stark contrast to the Great Recession, when excess supply and distressed sales brought down-home values.” Zillow forecasts home value appreciation will slow to 3.6% over the next 12 months from the 4.5% year-over-year growth seen in July. In the short term, the updated forecast is now more optimistic toward continued home value growth than previous releases. The likelihood of pessimistic scenarios—defined by persistent unemployment, mass evictions, and foreclosures, and an enduring spread of the virus—has increased in recent months, and that is reflected in the longer-term forecasted slowdown in home value appreciation in Zillow’s new, probability-weighted forecast model.
“While the housing market has so far sailed through the headwind of high unemployment, risks remain,” Tucker said. “A slow economic recovery that keeps millions of Americans looking for work could dampen home buying demand and may even lead to a wave of foreclosures when forbearance expires. This pessimistic possible outcome for 2021 has caused Zillow’s price forecast to shade down a bit.”
A major reason for the hot seller’s market in much of the country is the continued inventory shortage. Inventory is now down 28.4% year over year as of the week ending August 15, meaning there are 409,029 fewer homes listed on the market than there were a year ago. Inventory is down from last year in each of the 50 largest metros, and down the most in Riverside (-46.5%), Baltimore (-43.8%), and Hartford (-43.1%).
In contrast to the strong for-sale market, the rental side of the housing market continues to show softness. Year-over-year rent growth slowed again, with the typical rent up 1.2% to $1,749. In February, rents grew 3.9% year over year.
Rents fell from last year in nine of the top 50 markets. Rents were up from the previous year in each of the top 50 metros as recently as April. The biggest drops were in the three most-expensive markets in the country — the greater New York metro (-2.6% year over year), San Francisco (-2.5%), and San Jose (-2.2%).
Zillow’s weekly data showed pending sales up 15.1% year over year as of the week ending August 15. The median sale price as of the week ending July 4—the most recent data available—was $275,078, 3.7% higher than the same period last year.
Mortgage rates listed by third-party lenders on Zillow started the month at 3.26% and rose to a peak of 3.34% on July 3. Rates ended July at their monthly low of 3.03%. Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Group Mortgages site by third-party lenders and reflect recent changes in the market.