Zillow analyst names culprit of flat home sales, high housing prices

By Thérèse Boudreaux
The Center Square

Home sales are increasing slightly and mortgage costs are dropping across the nation, a new Zillow report reveals. Yet both the price of sold homes and the cost of rent continue to rise, illustrating what many have dubbed a housing affordability crisis.

Zillow’s June Market Report shows that U.S. home sales grew by 5.9% since last year, with a total of 381,125 homes sold in June. The number is a 9.2% increase since May.

Orphe Divounguy, senior economist on Zillow’s Economic Research team, cautioned against making rosy assumptions based on a single monthly report. He instead highlighted longer-term trends, which show that home sales are still nearly flat compared to last year.

“I’m always wary of the one-month data points,” Divounguy told The Center Square. “If you look at three-month averages, and you compare the three-month average this year to last year, sales are roughly 1.5% to 1.7% higher than they were a year ago, which is basically in line with our forecast for this year.”

Although home sales are still about 20% lower than they were before the COVID-19 pandemic, that isn’t due to a shortage of willing buyers, Divounguy added.

“If you look at the typical time it takes to sell a home, the market has cooled back to its pre-pandemic normal — you can expect to sell your home in 20 days or so,” he said. “So on the demand side, it’s not like homes are taking longer to sell; they’re selling at roughly the same pace as they did before the pandemic.”

According to data, the reason home sales still haven’t rebounded is largely due to lower inventory: the total number of homes for sale in 2026 is about 19% below pre-pandemic levels.

“Remember, we went through a season where people were switching jobs and getting raises, and the labor market was on fire. And basically you had a surge in residential mobility during that time,” Divounguy said. “There was a lot of pressure in the housing market, and so inventory kept falling, and it hasn’t recovered yet. Fewer homes for sale translates to fewer sales, because people can’t buy what’s not for sale.”

Despite decreased housing supply, the Zillow report shows that affordability has slightly improved from a year ago due to a variety of factors, including the fact that mortgage payments are down by about 2.5%.

“Because of the shift in mortgage rates, and the fact that price growth has been relatively flat on the year-over-year basis, mortgage payments for a new buyer putting 20% down on a down payment are actually lower than they would have been a year ago,” Divounguy noted.

“At the same time, incomes have increased from a year ago, and so when you combine relatively flat price growth, slightly lower mortgages, and higher income, you get an improvement in housing affordability.”

Divounguy acknowledged that affordability is “still a big challenge”, however.

While the Zillow report estimates the typical U.S. home value is $372,057, a new National Association of Realtors report found that the median price of homes sold in June was $440,600, a record high.

By comparison, the median price of homes sold in June 2019 was $285,400, which translates to $374,100 in 2026 dollars, per the NAR.

The Zillow report also showed renters are not exempt from rising prices in 2026. Though rent growth has slowed since 2022, when growth peaked at about 16% year-over-year, the typical rent nationwide is now $1,965.

That’s approximately 2.2% higher than last year and 32.5% higher than pre-pandemic levels.

It also means that rent eats up nearly 37% of the typical full-time U.S. worker’s wages, according to the U.S. Bureau of Labor Statistics annual income data for Q1 of 2026.

“From a renter’s perspective, even though rent growth has slowed, renters are still seeing increases, so they’re feeling the pinch,” Divounguy said. “If you look at the labor market right now, the unemployment rate remains low, but hiring rates also remain low. And if you have fewer job openings, people are not able to move on to a better paying job, and so a lot of renters are feeling kind of stuck.”

As with home sale prices, rental rates have risen partly due to supply constraints as the surge of new construction during and after the pandemic has tapered off.

“Affordability is still an issue, especially for those at the bottom of the income distribution, but ultimately, the biggest constraint on the housing market is the lack of homes to sell,” Divounguy said. “More homes to sell would actually help bring prices down, get that adjustment in prices that’s necessary to clear the market.”

One of the best ways to do that, Divounguy contended, is by updating land use restrictions and regulations that prevent new construction.

“One of the ways builders respond to rising costs is basically by leaning into higher density. If they can’t mitigate cost increases by leaning into higher density – for example, building more townhouses and condos – then they stop building,” he said.

“So anything we can do to lower the costs for builders – by revisiting land use restrictions, things like minimum parking requirements, building height requirements, minimum lot size – anything that can be done to lower the cost for builders and allow builders to adjust to changing market conditions is going to be good for housing in the long run.”