Home inventory rises as buying season starts

The increase in the number of homes for sale during February is good news going into the spring home purchase season, and that helped to alleviate competitive pressures, Zillow found.

Inventory rose 12% year-over-year. The total of over 900,000 homes on the market last month was the highest amount in any February since 2020. New listings rose 20% compared with January and were 21% higher than the same month in 2022.

Zillow's surveys as of late have found an elevated number of current owners planning to sell in the next three years.

"We're finally beginning to see owners who have been putting off moves return to the market," said Skylar Olsen, chief economist at Zillow, in a press release. "For many households with record-high equity, waiting out potentially lower rates later in the year may not be worth it."

But the time from listing to contract in February averaged 17 days, not as fast as it was during 2021 and 2022, but still quicker than prior to the pandemic.

Homes that are not priced appropriately or lack "curb appeal" have driven average time on the market to 53 days, which Zillow said is longer than normal for that time of year.

The share of listings where the seller reduced the price was 20.1%, which Zillow said was higher than usual.

The Zillow Home Value Index calculated the typical home being worth $349,216, versus $344,159 in January. This amount is also almost 41% higher than it was prior to the pandemic. Compared to February 2023, the ZHVI was up 4.2% nationwide.

A separate report from Redfin issued Thursday found the median monthly housing payment was $2,686 during the four weeks ending March 10. This was only $30 below the record set in October 2023. The combination of still-high mortgage rates and rising prices was responsible.

Redfin's own data found new listings increased 13% during the period, the biggest annual increase in nearly three years. Plus, the total number of homes for sale was up 3%, the biggest increase in nine months.

However, mortgage rates are likely to stay elevated for a while, especially after this week's Consumer Price Index report, which further solidifies the viewpoint that the Federal Open Market Committee is unlikely to cut short-term rates prior to June, Chen Zhao, Redfin economic research lead, said in a press release.

"Buyers who can afford to may want to get serious about their home search now, as housing costs are unlikely to fall anytime soon," Zhao said. "The uptick in listings should be another motivator for buyers: There's more to choose from, and improving inventory may bring out more competition from other buyers as we get further into spring."

That is already starting to occur with the recent uptick in mortgage application activity, Zhao said.

The Mortgage Bankers Association's Weekly Application Survey for the period ended March 8 reported the conforming 30-year fixed rate mortgage at an average of 6.84%, down 18 basis points from the prior week.

The purchase index component of the application survey increased 4.7% on a seasonally adjusted basis compared with March 1, but was down 10.8% from the same period in 2023.

"The decline in rates led to a solid gain in mortgage applications for the second consecutive week," MBA President and CEO Bob Broeksmit said in a Thursday morning statement. "With the spring home buying season underway, lower mortgage rates and more new and existing housing supply should boost mortgage demand."

First American Financial expects February existing home sales to rise 1.4% to a seasonally adjusted annualized rate of 4.05 million.

"The narrowing mortgage rate spread was the largest driver of the projected increase in our February existing home sales outlook," Mark Fleming, First American's chief economist, said in a statement. "Approximately 90% of homeowners are financially disincentivized from selling their home in today's housing market because it would cost more today to borrow the same amount of money they owe on their current mortgage."

But the spread between the average rate for a 30-year FRM and the effective interest rate on mortgage debt outstanding in February "fueled a 1.3 percentage point increase in the projected monthly change in existing home sales," Fleming said.