(TNND) — Zillow says the housing market just recorded its strongest October in three years.
Inventory continues to recover from record lows, affordability improved, and the month saw a 5% annual increase in both new listings and pending sales.
Cost challenges remain significant for buyers, but Zillow said the market is balanced on the national scale. And three new major markets became buyers’ markets in October.
Zillow said 19 major markets now favor buyers, nine more than last October.
Jeff Ostrowski, a housing market analyst for Bankrate, called the Zillow report “promising.”
But the housing market is far from fully recovered.
Existing home sales have been flirting with an annual pace of 4 million, with the market constrained by high prices and high mortgage rates.
The “lock-in effect” kept sellers on the sidelines, as they didn’t want to trade in their 3% mortgage rates for rates well north of 6%.
And that limited choices for buyers, who were already dealing with the rising costs.
Ostrowski said that a more normal housing market would see about 6 million annual home sales.
“It wouldn’t be hard to be better than the past two Octobers, just because it’s been such a bleak housing market for a few years,” Ostrowski said.
Mortgage rates have been down over the past six weeks or so.
The average 30-year fixed-rate mortgage was 6.27% in mid-October, compared to 6.44% at the same time a year ago and 7.63% two years ago.
Meanwhile, Zillow said the typical U.S. home value was up just 0.1% from last October.
The typical home nationally is now $362,117.
Ostrowski said home prices are still rising, though they’ve “stopped rocketing upwards.” And prices have actually come down in some markets.
Ostrowski said perhaps the lower mortgage rates and cooler price increases will help grease the wheels of the market.
The National Association of Realtors is forecasting a 14% increase in home sales next year, along with a 4% increase in home prices.
More activity could be welcome news for first-time buyers, who’ve struggled to break into the market.
A recent NAR report showed the age for a typical first-time homebuyer hit 40 for the first time.
Fifteen years ago, the typical first-time buyer was 30.
Five years ago, people typically bought their first home at age 33.
Jessica Lautz, NAR’s deputy chief economist and vice president of research, previously told The National News Desk that the challenges for young buyers are likely to have economic impacts for generations to come.
“It means 10 years of lost housing wealth gains for first-time homebuyers,” she said.
“But it also means that they’re building wealth at a slower pace, which could impact their future generations.”
Zillow’s new report showed that the housing inventory shortfall from prepandemic averages has improved.
The shortfall is now about 17%, a vast improvement from a 51% shortfall seen in February 2022.
It’s also the smallest supply deficit since the pandemic began.
Total inventory has risen nearly 13% since last year, Zillow said.
Zillow also said affordability for home buyers reached a three-year high.
A median-earning family with a 20% down payment would now need to spend 32.9% of their income on a mortgage for a typical home. That’s the smallest share of income needed since August 2022, according to Zillow.
But Zillow said that’s still above the 30% threshold that’s recommended so a house payment isn’t a financial burden. And the 20% down payment on a home is a serious hurdle for a lot of folks.
