Home shoppers are finding more options to choose from, more time to make decisions and even price cuts in some areas, according to Zillow's® latest market report¹. That's largely because intensifying affordability challenges are thinning competition from a crowded field and giving newfound leverage to those who remain.  

"Those who can weather this storm of rising costs are having an otherwise less stressful buying experience compared to the pandemic-fueled rush on real estate in 2021. They have more options to tour, more time to find the right house, and are less likely to face a bidding war," said Jeff Tucker, senior economist at Zillow. "But despite this initial move toward rebalancing, the market is still less buyer-friendly than the pre-pandemic norm in most of the country. Home seekers who are priced out today are eagerly anticipating drops in prices or mortgage rates so they can step back into the ring." 

Home values recede in the most expensive metros
Annual home value appreciation eased for the third consecutive month in June, stepping down to 19.8% from a record high of 20.9% in April. But it still towers over the 4.6% year-over-year growth recorded in June 2019. The typical U.S. home value now stands at $354,165 and comes with a monthly mortgage payment that is more than 75% higher than in June 2019. 

Home values declined slightly from May to June in San Jose, Seattle, San Francisco and San Diego — all among the five most expensive metros — as well as in Austin, where home values have grown the most throughout the pandemic. Annual appreciation is still robust in these metros — from 15.4% in San Francisco to 25.2% in Austin. 

Less competition means more options and time to decide
Inventory has risen steadily over the past few months, bringing an annual deficit of 30.4% in January down to 9.1% in June. But the total pandemic hole is far from being filled. Inventory is still down 46% since June 2019. 

Extremely expensive metros and those with the largest run-up in prices over the course of the pandemic — San Francisco, Austin, Phoenix and Seattle — have inventory levels closest to where they were in 2019. This indicates competition in these areas is easing up more quickly than the national average. Median time on the market has ticked up, meaning buyers have slightly more time to shop, compare and evaluate options. Listings that go pending are typically doing so in seven days, which means competitively priced homes are still selling at a rapid clip. 

The share of homes with a price cut is rising across the U.S. as well, and at 14.8% is at the highest level since November 2019. Salt Lake City (24.1%), Sacramento (21.7%) and Phoenix (20.4%) are seeing the highest shares of price cuts.  

High costs driving sales pullback
A lack of affordable options is driving the slowdown. Of the 15 major metros that saw the largest month-over-month drops in listings that went under contract, 12 are among the nation's 15 most expensive places to buy. The fastest drops in newly pending sales from May to June are taking place in San Jose (-24.3%), Seattle (-23.9%) and Salt Lake City (-20.8%). 

Conversely, of the 15 major metros with the smallest monthly pullback in sales, 10 are among the 15 least-expensive large cities. 

Rent growth eases 
Typical U.S. rents rose 0.8% from May and are now $2,007 per month, crossing the $2,000 threshold for the first time. Annual rent growth has eased steadily from a record-high 17.2% in February to 14.8% in June. Rents are up 24.6%, nearly $400 per month, since June 2019.

"A rapid run-up in rents that peaked in February was likely a one-time event, driven by a return to cities and people moving out of shared apartments or their parents' house. We're expecting rent growth to ease back down over the next several months as vacancy rates rise above historic lows," said Tucker. "One factor that could slow the return to normal is the high cost of buying a home, which will encourage many renters to renew their lease instead."