More homeowners are willing to sell as market conditions shift, giving buyers more options
For the past two years, many homeowners have been hesitant to sell, unwilling to part with their ultra-low mortgage rates in a high-interest environment. But that hesitation is starting to fade.
The latest Zillow housing report shows that more homeowners are returning to the market, driven by strong home equity and life events pushing them to move.
At the same time, buyers are still facing affordability challenges, as mortgage rates climbed to 7.04% in January, significantly higher than the mid-6% range seen at the same time last year. That has made it harder for many to close deals, with newly pending sales dropping 3.6% year over year.
"Sellers are in a good position and are willing to make price cuts to close a deal," said Skylar Olsen, chief economist at Zillow, which reported a net loss of $52 million in the fourth quarter. "Home equity is near record highs, and the general economy and financial markets are surprisingly strong. Homes are selling faster than they did before the pandemic."
Sellers no longer holding back
The so-called rate lock effect—which has kept many sellers on the sidelines—is losing its grip, as more homeowners list their properties despite higher mortgage rates. Zillow reports that new listings from existing homeowners increased by nearly 12% year over year, suggesting that sellers are moving forward with their plans, regardless of where rates stand.
The biggest driver behind these sales? Life changes, not mortgage rates, according to Zillow. The survey found that 78% of recent sellers made the decision to move due to major life events, such as job changes, growing families, or downsizing needs.
However, fewer sellers are buying another home immediately after selling. Zillow found that only 54% of sellers went on to purchase a new home, down sharply from 70% last year. That suggests many are choosing to rent, relocate to more affordable areas, or cash out on their equity rather than re-enter the market at today’s interest rates.
More sellers are listing their homes across the country, but some expensive West Coast markets are seeing the sharpest increases:
- Portland (+48%)
- Seattle (+40%)
- Denver (+34%)
- San Francisco (+32%)
Despite these new listings, inventory remains below pre-pandemic levels, meaning buyers still face competition for move-in-ready homes.
Buyers have more negotiating power
Even though high mortgage rates have made affordability a challenge, buyers are finding more opportunities to negotiate. Zillow’s data shows that more sellers are cutting their asking prices, making it easier for buyers to find deals on the margins.
In January, 23% of sellers reduced their list price - the highest share since 2018.
Phoenix saw the most price reductions overall, with 34% of its listings seeing price cuts. Other metros where price reductions were common included Tampa (32%), Jacksonville (31%), Orlando (29%), and Dallas (29%).
But not all sellers are slashing prices. Nearly 25% of homes sold in December closed for more than their asking price, an increase from 19% before the pandemic.
Read next: US home prices keep rising as nearly 90% of metro areas see gains
The time it takes to sell a home remains faster than pre-pandemic norms but slower than last year. On average, homes are going under contract in 38 days, which is nine days slower than January 2024, but still about 10 days faster than typical pre-pandemic sales timelines.
That said, sales are moving quickly in some metros and dragging in others. San Jose, Boston, Seattle, and Washington, DC are seeing homes sell in two weeks or less, while Southern markets – including New Orleans, Atlanta, and major Texas and Florida metros – are seeing much slower sales activity.
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