Dr. Skylar Olsen, Chief Economist at Zillow, delivered a comprehensive analysis of the housing market and examined future considerations in the housing sector.
Affordability Challenges for First-Time Buyers
Olsen detailed severe affordability challenges faced by first-time homebuyers. High down payments and volatile mortgage rates significantly impact buying power, making homeownership increasingly difficult for this demographic. Olsen emphasized that even a slight reduction in mortgage rates, from 7% to 6.5%, can substantially enhance affordability, illustrating the dramatic effects of rate fluctuations on buyers’ purchasing power.
With sales prices reaching record highs, Olsen highlighted the significant increase in down payments needed for middle-income households to afford a typical mortgage payment.
Market Dynamics
Despite some easing in market competition, Olsen noted that it remains a seller’s market. Popular and well-priced homes continue to sell quickly, although some properties have stayed on the market longer than before. Zillow’s new Market Heat Index, which utilizes customer search volume, provides fresh insights into market activity and helps track these dynamics.
Rent vs. Buy Dilemma
Olsen examined whether it makes more financial sense presently to rent and save or buy a home. Rental market trends and new construction play crucial roles in this decision. While market-rate rents are rising, Olsen noted that growth is slower for apartments, and renter concessions are becoming more common as asking rents soften. Additionally, she highlighted a resurgence in single-family home construction, which is essential for addressing the housing deficit. However, Olsen cautioned that builder confidence might wane, potentially stalling this progress.
Affordability and Policy Considerations
Olsen outlined the Build the Middle playbook, newly designed by Zillow and the Casita Coalition. This resource aims to empower policymakers, community leaders, and advocates in expanding housing affordability choices and includes detailed case studies from eight leading cities and states.
Highlighted steps and local variations from the playbook include:
- Removing first-generation zoning barriers that make middle home types infeasible or too costly.
- Building upon recent policies that promote accessory dwelling units (ADUs.)
- Addressing second-generation barriers associated with financing, implementation, cost of development, and workforce development.
Olson also stressed the importance of closely monitoring mortgage rates, inflation, and the Federal Reserve’s actions to understand future affordability trends.
Resources
Olsen’s analysis underscored the need for proactive measures and vigilance to ensure a balanced and accessible housing market. Detailed data and insights are available through Zillow’s research and data pages, along with extensive resources such as:
For further information, contact Zillow’s press team at press@zillow.com.