As we head into homebuying season, prospective buyers can expect significant decreases in traffic and competition from pandemic-era levels. However, according to a new analysis from Zillow, there will still be competition for affordable homes.
“Affordability will still be a challenge for many buyers this year, but sellers who price and market their home competitively shouldn’t have a problem finding a buyer,” said Zillow Senior Economist Jeff Tucker in a press release. “The slight drop in mortgage costs since October should revive demand after last fall’s slump, especially in more affordable markets and neighborhoods, but we are unlikely to see competition approach the fever pitch seen in the last two years.”
While inventory across the country is similarly scarce to levels seen in early 2021, consumer demand has significantly decreased thanks to hefty increases in mortgage rates. This led to significant price cuts in January — last month, 22% of active listings underwent a price reduction, the highest January level since 2018.
However, Zillow says that people waiting for prices to “plunge or skyrocket” will be disappointed. Instead, prices will inch up for the spring home-buying season from the expected winter lows. Factors like inflation, unemployment and mortgage rates will ultimately determine supply and demand.
“The housing turnaround since November has coincided with what are typically the weakest three months of the year — forecasting the future off that can be dicey,” Tucker continued. “The economic news from earlier this winter raised hopes for a soft landing of the economy and housing market, but the risk of renewed inflation or even a recession is still significant, and either would have a serious impact on the housing market.”