Why Early Fall Could Be the Next Housing Market ‘Sweet Spot’
If you’ve come up empty-handed after home shopping all spring and summer, you might want to keep your eyes peeled over the next few weeks. The market nationally has finally turned into neutral territory, putting buyers and sellers on equal footing as mortgage rates trend lower and price growth slows.
The combination of easing price growth, slower sales, and rising inventory means that buyers looking for a deal should keep their eyes open for listings with price cuts as well as those that have been on the market for several weeks. They should also expect sellers to be more willing to offer concessions, especially around closing costs that can help lower the monthly payment, says Zillow® Chief Economist Skylar Olsen.
“The U.S. home shopping season cooled off early,’’ Olsen says. “But mortgage rates have come down somewhat and affordability has improved, meaning competition could heat up again.”
Buyers waiting on the sidelines could find that early fall presents a “sweet spot,” where there’s less competition from other buyers, more motivated sellers and lower interest rates to finance their purchases.
But mortgage rates remain highly volatile and could very well inch back up, says Olsen, and local markets have their own dynamics. For buyers who have lined up their financing, feel good about their employment picture, and are working with an agent who knows their market, the next few weeks could provide a better entry point than they’ve seen in the recent past, she says.
Here are five things you should know about the market in the coming weeks and months.
1. You may have more negotiating power
Competition for homes cooled earlier than usual this year, with slightly slower sales and more homes to choose from than a year ago. The number of homes for sale in July was nearly 25% higher than last summer, and 1.3% higher than just a month earlier, according to a Zillow analysis.
Homes are still selling quickly, but buyers have a little more breathing room this year. The typical home that accepted an offer in July took 18 days to go under contract after listing, six days longer than last year. The typical listing on Zillow in July – not just those that went pending that month — was on the market for 51 days in July — 11 days longer than a year earlier.
The market historically slows in the fall, but Olsen says the significantly slower sales pace is a sign that buyers are much less eager to commit to today’s home prices at the prevailing mortgage rates. The calmer market is giving buyers more time to shop.
The softening demand from buyers struggling with affordability helps explain why more than a quarter of sellers (26.3%) cut their prices in July, a bump over the previous month, the analysis shows.
“Sellers haven’t gotten the memo quite yet,’’ says Senior Economist Orphe Divounguy. “They’re still listing their homes too high. That’s why you’re seeing more price cuts on these homes. And the homes that are mispriced are staying on the market longer.”
2. Home price growth is slowing down
Although home values are still climbing, they’re doing so at a much slower pace than earlier this year.
Home price growth was nearly flat in July, growing at a mere 0.5% annualized pace. Zillow forecasts that values will rise just 1% nationally through June 2025. The slower pace of appreciation could give buyers a chance to lock in their buying budgets.
For tips on how to find a bargain-priced home, read 9 Tips for Finding a Bargain-Priced Home.
3. Mortgage interest rates have dropped but perhaps not for long
The Federal Reserve Board is widely expected to cut its key policy rate in September and possibly beyond that. However, current mortgage rates may already reflect Fed expectations.
Average rates on 30-year fixed-rate mortgages dropped to 6.4% on August 1, 2024, as investors overreacted to a weak jobs report. They ticked back up a week later when investors calmed down, but the 6.63% average rate on August 8 was well below the average of 7.13% about a month earlier, according to Mortgage News Daily.
On a $288,000 mortgage — the size needed to buy a typical U.S. home valued at $360,000 home with 20% down — the monthly mortgage payment on a 30-year fixed-rate loan at 6.6% would be $1,839. This is down roughly 5% from the peak in May.
Buyers who plan to continue — or start — their home search this fall should act quickly and get pre-approved for a mortgage, Divounguy says.
“Potential home buyers who are ready now should not wait on Fed rate cuts to make a decision about purchasing a home,’’ he says. “Mortgage rates are incredibly difficult to predict but the pressure remains up, not down. Besides further improvements in housing affordability coming from lower mortgage rates could heat up the competition for homes.”
4. The market should slow further in late fall
Come October and early November, the market experiences a seasonal slowdown. While this means less competition from other buyers, it could also mean fewer new listings to choose from since sellers typically wait until after the new year to list their homes.
”I think inventory is expected to continue to increase, but at a slower pace,’’ Divounguy says. “New listings increased from January to May. They usually peak in May, and then start declining after that, right into the slower summer months. And that’s exactly what we’re seeing.”
The slower addition of new listings in the fall means it’s unlikely there will be a sudden spike in listings with price cuts, he says.
“You have to have a big increase in inventory to see more price cuts, so you’re not necessarily going to see a big price decline,’’ he says.”
5. It’s no longer a seller’s market nationally, but local markets vary
Nationally, the market finally reached neutral territory after a long stretch that strongly favored sellers, according to Zillow’s Market Heat Index.
“It’s not very likely that we’re going to see the pendulum swing all the way in favor of buyers,’’ Divounguy says. “I think we’re going to see small improvements here and there in markets that build a ton of housing, because, remember, builders are still out there building homes.”
“Inventory is the highest it’s been in years, but it’s still 32% lower than before the pandemic,’’ Divounguy says. “Given what I saw this year — where sellers are basically pulling back in June — I don’t think we’re going to get back to what I would call the old normal. I think this is a housing market that is likely going to function with fewer home listings than before the pandemic — at least for now.”
Metros where buyers have an edge
Only 11 markets favored buyers in July, with more than half of those located in Florida. They are:
Cape Coral, FL
McAllen, TX
New Orleans, LA
North Port, FL
Deltona, FL
Miami, FL
Jackson, MS
Jacksonville, FL
Tampa, FL
Palm Bay, FL
Memphis, TN
Hottest sellers markets
Northeast metros topped the list of markets where sellers have a strong edge. Markets that strongly favor sellers are: Rochester, NY; Syracuse, NY; Buffalo, NY; Albany, NY; Hartford, CT; San Jose, CA; Springfield, MA; Worcester, MA; San Francisco, CA; Madison, WI; Bridgeport, CT; Akron, OH; Boston, MA; Providence, RI; New Haven, CT; Cleveland, OH; New York, NY; Minneapolis, MN; Richmond, VA; Washington, D.C.; Grand Rapids, MI; St. Louis, MO; Seattle, WA; Milwaukee, WI; Los Angeles, CA; Allentown, PA; Columbus, OH; Chicago, IL; Kansas City, MO; Portland, OR; Baltimore, MD and Sacramento, CA
The bottom line
Despite the challenges, it’s still possible to work with your agent to take advantage of that sweet spot to find a deal. At this time of year, the drop-off in demand from competing buyers is steep enough to potentially outweigh the lack of new listings. Determined buyers who know what they want could find they’ve got a lot more elbow room at open houses, and more leverage at the negotiating table.
“It’s important for buyers to keep an eye on these trends when considering buying,’’ Divounguy says. “Understanding when the market tends to heat up or cool down can help inform decisions.”
Reference:
Why Early Fall Could Be the Next Housing Market ‘Sweet Spot’ | Zillow