Why now is a good time to start house-hunting

Homes are getting modestly more affordable for Americans.

Residential real estate prices have dropped every month since July, with January marking the sixth consecutive month of declines, according to new figures from Zillow.

Two factors explain the dip in home prices. First, seasonal factors are playing a role.

“Home prices tend to peak in July and then come down,” Zillow chief economist Mischa Fisher told CBS News.

Second, demand from buyers remains relatively weak, forcing home sellers to drop their prices.

“Buyers are having a hard time with labor market uncertainty, and with mortgage rates, which aren’t close to what they used to be,” Fisher said.

The average mortgage rate is just under 7%, more than double the roughly 3% rates that prevailed during the pandemic.

To be sure, Zillow’s home price index dropped 0.4% from December to January, while home values remain 0.2% higher compared with a year ago. The typical U.S. home is currently valued at $358,968, according to the real estate firm.

Fisher noted that Zillow expects 20 of the nation’s major housing markets to be more affordable this year than they have been since 2020. The firm considers homes affordable when a typical buyer can purchase a house for less than one-third of their income.

In a plus for house-hunters, more homeowners are putting their properties up for sale. In January, more than 1.2 million homes were listed, up 6% compared to the same period a year ago, Zillow data shows.

“That is good news for buyers. If you’ve been waiting to buy, now is a good time to be looking,” Fisher told CBS News. “You’ll have more to choose from, and you can afford more.”

In a separate forecast, Realtor.com recently predicted that home prices would dip in 22 of the 100 largest cities around the U.S.