Although rising mortgage rates are placing new burdens on potential buyers, inventories are beginning to rebound, the March Zillow Real Estate Market Report revealed. And overall, the first month of spring marks the return to a more balanced market.
Given the record mortgage rates set during the pandemic, higher rates were widely expected throughout 2022. “But the speed of their rise has been breathtaking,” said Zillow senior economist Jeff Tucker. , in the report. “March was the biggest test yet of whether enough buyers can meet the new asking prices to keep home values at a record pace, and the answer has been, ‘So far, yes.’ “
By the end of March 2022, the 30-year mortgage rate for a home in the United States had risen 19.5% since December 2021, although home sales were not discouraged. In fact, newly pending sales rose 11.6%, month-over-month, exactly the same percentage as the nationwide increase in inventory in March. And this perfect correlation reflects a constantly hungry demand. The median time on market has also shrunk — two days month-over-month and, most notably, 24 days since pre-pandemic March 2019 — to nine days.
And for the 12th month in a row, home values also rose. The median home price in the United States is now $337,560, 20.6% higher than a year ago, while the median home price in Chicago is $300,651, 14 .3% more than a year ago. Of course, that’s not so surprising. Nationally and locally, home values have ballooned due to a continued lack of inventory. But even that dilemma saw a silver lining in March as housing supply rose by its biggest share since 2018. Nationally, listings rose 11.6%, and in the metro area of In Chicago, the jump was even sharper: up 14.9% for a total of 24,830 Ads.
Yet inventory remains generally tight with the number of homes on the market, nationally, lower than any month on record before January 2022. And in turn, that leaves room for home values to rise – although perhaps more modestly than expected. Zillow’s official home value forecast now calls for 14.9% growth through March 2023, down slightly from February’s forecast for the year ahead, which estimated 16.5% growth. . Additionally, Zillow lowered its 2022 home sales forecast to 6.09 million sales. And while the adjustment illustrates an expected 0.5% decline from sales seen in 2021, it would still mark the second-best year for the market since 2006.
Only time will tell, however, how deterred buyers are by high mortgage rates. With the peak mortgage rate of 4.54% in March, new homeowners can expect monthly payments that are, in total, 38% higher than last year (assuming a 30-year mortgage with a down payment 30%). Again, for those considering buying their own property, the Zillow report also factors in rising rents. With Gen Z renters entering the market, vacant rental units are near an all-time low, with prices rising to compensate for the pandemic’s brief pause. Here in Chicagoland, the median monthly rent in March was $1,842: 12.1% higher than a year ago and 0.1% higher than the previous month.
So, with renting and buying being touted as increasingly expensive options, Zillow predicts a robust, but relatively stable, spring housing market. “There will be a time when the cost of buying a home deters enough buyers to bring price growth back to Earth,” Tucker concluded. “But right now there’s plenty of fuel in the tank as the stay-at-home shopping season kicks off.”