Zillow December 2022 Housing Report
Coming off of record years, the housing market ended 2022 in a deep freeze according to Zillow economist Jeff Tucker. The question is, will the spring market start to thaw out? Whether you’re looking to buy or sell a home in Huntsville, looking at how national housing stats compared to local housing stats can help you make an informed decision that best fits your home buying or home selling needs.
Pending Sales, New Listings, & Home Values
One of the things that stood out to me in this report is that the national stats reported by Zillow are very much in line with what we're seeing here locally in Huntsville. The first stat that popped out was pending sales dropped 32.5% nationally, they've dropped 32.2% here locally. New listings have dropped 27.8% nationally and 27% locally. The one stat that was a little bit off national versus local was home values. Home values are up 8.4% year over year nationally but only 3.2% locally. I think a little bit of that has to do with seasonality, so I wouldn't factor too much into that.
Percentage of Listings Sold Above List Price
Percentage of listings that sold above list price was also a notable stat. Obviously it was a very hot market last year, you would expect that number to be high. In November 2021, that number was 44.1% but last month in December 2022 it was at 27.9%. We went from 1 in 2 selling above list price to 1 in 4, which is still a very high number showing that we're still in a seller's market. I do think that number is likely to decrease in 2023 and then likely increase once we see rates significantly drop again.
New Home Listings
The stat that stood out to me most on this Zillow National report is the number of new listings that came active in December. A lot of people are wondering why we're not seeing price depreciation and prices dropping as we head into 2023 and in even in the later part of 2022. The reason for that is simple economics, supply and demand.
We definitely have less demand with interest rates rising. That’s showing up in the 32.2% drop locally in terms of the number of homes being sold. We also have a lack of supply, there are fewer homes coming available on the market. In fact we have the lowest number of listings coming on the market nationally in four years, dating back to December 2018, at 197,994 new listings which is why we're seeing prices being flat. We're having fewer listings and also fewer sales.
A good sign for the housing market is that rental rates are actually starting to decline the rate of appreciation, which is a good sign for stabilization within the market. They actually declined 0.3% month over month in December. The reason this is good for not only rentals but also housing prices in general, is that as rental rates start to stabilize, that lowers the price in which investors are willing to pay for a home.
Over the last couple of years, they're willing to pay above list price and bid up homes because rental rates were rising so fast they were paying for future cashflow. The average rent is now $1,981 per month. You compare that to the Zillow National Home Price average, and with current interest rates and a 20% down payment assumption, the purchase price of mortgage price is $1,795. It’s still cheaper to not only buy a home versus rent, but then we also factor in all the appreciation, mortgage pay down, and tax benefits of buying as well; buying is still a no brainer in this market.
Interest Rates Are Affecting Buyer Demand & Seller Motivation
Mortgage rates are dropping and creating additional interest on the buyer side. Zillow economist Jeff Tucker said that if this continues to happen, you might expect to see a normal or even a boring market in 2023 which is contrary to what a lot of people have been predicting. They've been predicting volatility and dramatically lower sales, so if interest rates come down to a certain point he thinks that's going create a more normal market like we saw in 2017, 2018, and 2019.
Mortgage rates are dropping and increasing buyer demand but the question is, how will the mortgage rate lock down effect affect sellers entering the marketplace? A lot of sellers and homeowners have interest rates starting in the 2’s or 3’s, so what interest rate are they motivated to reenter the marketplace?
Our own internal survey showed this as well. 41% of the people polled showed that they were interested in buying a home in 2023, yet only 27% were interested in selling a home in 2023. That's a gap of 14%, we're going to have to make up that supply and demand imbalance for this to continue to be a healthy market.
Another question we asked in our survey was “of the people that are not planning on buying in 2023, at what interest rate would you be motivated to get back into the marketplace?” For the majority of buyers, that number was 4.5%. Ironically, that's also the 20-year national average for interest rates in the US. 4.5% is a key interest rate to be looking at. Another key interest rate to be looking at is 5.5% because as we saw rates increase from the 2’s into the 3’s and even into the mid 5’s, we still saw a strong sellers market. It was when we went north of 5.5% when things started to balance out.
The thing for us to watch as interest rates start to decrease and there are more buyers coming into the marketplace, what will sellers do? If there are not enough sellers that are motivated enough to enter the market, that's going to create an appreciating market again.
As current renters transition from renting to buying, expect to see another boom here in our local market. If you're looking to transition from renting to buying or if you're looking to sell your home in 2023, shoot us an email at email@example.com or contact us here.
Posted by Matt Curtis on