The Current State of the U.S. Housing Market: An Analysis

　　In the past year, the U.S. housing market has experienced a significant downturn due to low inventory levels, high mortgage rates, and rising home prices. However, a recent report from Zillow suggests that the market is actually more active than it was before the pandemic, despite inventory levels reaching their lowest point in late 2023.

　　1. Faster Home Sales

　　Competition in the housing market has cooled since the pandemic, but it remains higher than pre-pandemic levels. Homes are selling at a faster rate, largely due to the lack of available inventory, as explained by Zillow senior economist Orphe Divounguy.

　　Currently, homes are going under contract in a median of 30 days, which is one day less than last year and 50% faster than the pre-pandemic median of 45 days. This accelerated pace is primarily driven by low inventory levels and pent-up buyer demand. However, Divounguy anticipates that buyers who were sidelined by high mortgage rates may re-enter the market as rates continue to drop.

　　2. Stiff Competition Due to Limited Inventory

　　The limited inventory in the housing market has resulted in stiffer competition among buyers. In September 2023, existing-home sales dropped by 15% year-over-year, reaching a seasonally adjusted annual rate of 3.96 million transactions, the lowest figure since the Great Financial Crisis in 2010. This decline was largely attributed to the peak in mortgage rates at 8%.

　　While supply has improved slightly, changes in mortgage rates have a more significant impact on demand. As a result, competition among buyers remains strong. Although purchases are happening at a faster pace than before the pandemic, the lack of supply means that there are fewer housing transactions overall, with inventory levels 36% lower than pre-pandemic levels.

　　3. Increased Home Values and Mortgage Rates

　　Mortgage rates reached a multi-decade high late last year, while home prices continued to increase. This led to a 7.5% year-over-year increase in the typical mortgage payment in December 2023. Furthermore, the typical mortgage payment is now 106.5% higher than the pandemic average.

　　The average home price in the U.S. is now $344,000, with a monthly mortgage payment of $1,790, assuming a 20% down payment. However, with the Federal Reserve slowing its pace of interest rate hikes, mortgage rates are expected to stabilize. This could potentially loosen the grip on sellers and bring more activity back into the market.

　　Additionally, more homeowners are considering selling, with over one in five homeowners expressing this intention, compared to 15% a year ago. This is largely due to the massive equity that homeowners have accumulated, with home values increasing by 41% nationwide since 2019. Approximately 70% of sellers turn around and purchase another home.

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