1 in 4 sellers cut home prices as inventory grows

Home listings are increasing as buyers step back from the peak home shopping season more quickly than usual, according to Zillow's latest monthly report.

Skylar Olsen, Zillow's chief economist, commented, "An increasing number of homes that are not competitively priced or well marketed are staying on the market longer. Sellers are cutting prices to attract buyers who are struggling with affordability. The housing market, once characterized by rapid sales and limited options, is beginning to resemble the pre-pandemic market in terms of competition, though not in terms of costs. As the wait for mortgage rate relief continues, slower price growth and even declines in some areas may help buyers save for a down payment."

Inventory Slowly Recovers

The total number of homes available has been rising throughout the year, up 4% from May to June and nearly 23% higher than last year's low. While inventory remains about 33% below pre-pandemic levels, this is the smallest deficit since the fall of 2020, when the number of available homes was rapidly decreasing.

Inventory is higher than last year in 48 of the 50 largest U.S. metropolitan areas, with only New York and Cleveland seeing declines. Additionally, inventory rose month over month in all but five of these areas.

Attractive listings are selling relatively quickly, but buyers now have a few more days to consider their options compared to last summer. Homes sold in June were on the market for an average of 15 days before receiving an offer, which is five days shorter than pre-pandemic norms and the smallest difference since June 2020.

High Costs Weigh on Buyers

Despite a decrease in mortgage rates from May's peaks, buyers are still facing costs that have outpaced wage growth. In 39 out of 50 major markets, a median-income household can afford mortgage payments on a typical home with a 20% down payment.

With many buyers sidelined by high costs, Zillow's Sales Nowcast for June dropped 9% from May, and sales are 35% lower than pre-pandemic levels.

Slowing Appreciation Could Benefit Buyers

Home value growth has slowed as inventory increases. Annual appreciation is now at a moderate 3.2%, down from a peak of 4.6% in March 2024. Monthly growth has slowed to 0.6%, marking the slowest June appreciation since 2011.

This deceleration in home value growth might provide struggling buyers with an opportunity to catch up. Zillow forecasts that home values will rise by just 1% nationally through June 2025.

Cooling Competition Brings Price Cuts

Although sellers still have a slight advantage nationally, Zillow's market heat index suggests that a balanced market may be near. Competition is easing most rapidly in the South, with all major Southern markets being either neutral or favorable to buyers, except Dallas and Raleigh.

Sellers are frequently reducing prices to attract buyers, with nearly 25% of listings receiving a price cut in June—the highest rate for this time of year since Zillow began tracking in 2018.