Although mortgage rates have yet to reach the magic number of five percent, homebuyers are taking what they can, according to Zillow’s latest report.
Easing mortgage rates and home prices created the perfect conditions for consumers in October, with the number of new listings and accepted offers both rising five percent year over year.
The average 30-year mortgage rate reached 6.25 percent in October, the lowest level in more than a year, while median home prices stayed relatively flat, rising only 0.1 percent year over year to $362,117. The fluctuations in mortgage rates and home prices resulted in a win for buyers, reducing mortgage payments by 1.8 percent from October 2024 — the most significant affordability gain seen in three years.
Kara Ng | Credit: Zillow
“Buyers and sellers both got some badly needed relief to perk up what is typically a shoulder season for the housing market,” Zillow Senior Economist Kara Ng said in the report. “The reaction to lower rates shows that buyers are ready to make offers when affordability improves.”
New listings increased the most in the lower Midwest and Southeast, with Tampa, Florida; Raleigh, North Carolina; Orlando, Florida; Columbus, Ohio; Louisville, Kentucky; and Indianapolis seeing double-digit annual percentage gains in October.
Total inventory during the month rose 12.8 percent year over year, the report said.
October’s inventory levels signal the market is moving in the right direction, as it’s the smallest supply deficit since March 2020 and far from the 51 percent inventory shortfall in February 2022. However, inventory is still 17.3 percent below pre-pandemic averages.
The boost in inventory led to increased contract signings, with pending sales increasing 5 percent year over year in October— a feat, considering that sales tend to taper as the market moves toward the colder holiday months.
Once again, Tampa led the way in newly pending sales (+38.5 percent YoY), followed by Boston, Orlando, Jacksonville and Miami.
Although the fall has served as a pleasant surprise, Ng said the winter may be a cold reminder of market challenges.
Affordability is still a major concern for buyers, she said, with the median-earning household spending 32.9 percent of its income on a mortgage for a median-priced home, given a 20 percent down payment of $72,000.
“While fall has been a sneaky good market for buyers and sellers who stuck it out past the busy season, winter is coming, and it may bring rate volatility with it,” she said. “This warm-up is not guaranteed to last.”
