The fast-approaching spring home shopping season should feel a bit calmer than in recent years. Shoppers can expect competition for well-priced homes, but without the crowds of buyers that packed open houses like they did in 2021 and early 2022, according to a new Zillow analysis.
“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. “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.”
Spring outlook and what it means for buyers, sellers, and prices
There are as few homes for sale to start the year as there were in 2021, which, at the time, was a new record for scarcity. But the market is far from the white-hot demand-side conditions of early 2021 and 2022 when ultralow mortgage rates triggered bidding wars over most listings.
Buyers should expect competition — especially in more affordable markets- and at lower price points. On the seller side, well-priced, well-marketed homes will receive attractive offers during their first weekend on the market.
Buyers and sellers waiting for home prices to either plunge or skyrocket will be disappointed. Instead, prices are forecast to move on a slow, boring trajectory like they have historically, and inch a little higher in the spring after seasonal winter lows.
While heat in the housing market has ticked up in the past few months, there’s no guarantee it will continue along this path. The courses of inflation, unemployment and especially mortgage rates will determine what comes next.
Mortgage rates will affect both demand and supply significantly. If rates move lower, toward 6% or below, they will bring more buyers into the fold and make it more palatable for homeowners to sell, increasing supply. If rates hover in the upper 6% range or above, buyers may once again put their house hunt on hold.
Tucker said, “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. 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.”
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