On the heels of the latest Zillow market report, which showed rising inventory and cooling rents, we spoke with Senior Economist Jeff Tucker for three timely market insights agents need this spring.
1. Inventory rose substantially in March, a welcome return to seasonal norms as interest rates rise.
Takeaway for fatigued buyers: “The big one is that there’s a lot more fish in the sea. If the home this weekend gets bought up, or you get outbid on it, you’re going to see more homes on the market next weekend. Buyers should make sure they’re up to date on mortgage rates and double-check their budgets before the next round of open houses.”
“With rates rising, the other takeaway is that $2,000-a-month mortgage payment buys you less today than it did in November or December,” Tucker says. “It’s important to be really clear about what exactly their budget can get them, because it’ll save time that might otherwise be wasted on homes outside their budget.”
“It’s important to be really clear about what exactly their budget can get them, because it’ll save time that might otherwise be wasted on homes outside their budget.”
“The important questions remain: Can you afford this home? And will you be happy there for several years? At least three and probably five years in a home is a pretty standard horizon for buyers. If you answer yes, this 5% interest rate is maybe a bummer compared to a year ago, but that option isn’t really on the table anymore.”
2. Home values are still increasing quickly, but no longer accelerating on a monthly basis. The typical U.S. home is worth 20.6% more than it was a year ago.
Takeaway for uncertain sellers: “There’s not a lot of strategic reason to hold off from selling, Tucker says. “When we analyze the best time to list from a perspective of home sale-price behavior, late April is the best, and May is a very close second.”
“Our forecast shows that we are close to the peak pace of appreciation, but that’s very different from being at the peak price level. Prices are rising quickly, and expect them to be rising through this spring selling season. So this holds up as that time of year where inventory hasn’t risen that much yet, and a lot of buyers are coming into the market.”
“Prices are rising quickly, and expect them to be rising through this spring selling season.”
3. Annual rent growth slowed for the first time in more than a year. Rents grew less than 1% from February, suggesting slower growth ahead.
Takeaway for renters thinking about buying: “The big questions here,” Tucker says, “are ‘How long do I want to stay here in this town or neighborhood, but also this particular home?’ and then, ‘Do I expect my family to grow, and will we fit in this home for several years?’ And finally, ‘Can I afford the payments and the maintenance?’ If you’re answering yes, and with interest rates where they are today, I think buying is a really reasonable choice.”
“It depends a lot on what you think the price of that home and the price of a comparable rental are going to do over the next several years. And frankly, both of those have become a lot harder to predict in this environment.”
“That’s why I think home ownership remains attractive. It’s one big part of your budget that you can nail down and say, ‘Okay, my principal and interest is going to be the same every month from now until 2052. That’s really attractive to people.’”