The pandemic-era housing shortage is becoming less severe as inventory accumulates. Zillow found that inventory in May has risen 22% compared to the same period last year. It's still 34% below where it was before the shutdown, but the deficit continues to shrink.

The latest Zillow report found that home sellers are re-entering the market but are being met with hesitant potential buyers. Slow contract applications are allowing buyer competition and price growth to lessen. 

Home prices are just shy of their record-high and the average 30-year mortgage rate is sitting at a stubborn 6.99%, more than double the pandemic-era low, Redfin says. 

Zillow found that new listings saw a steep increase of 8% from April to May, outpacing home sales last month. 

Homeowners are becoming less attached to the low interest rates they locked in during the pandemic. Recent sellers were motivated to list by external life events, such as starting a family, rather than seeing favorable financial conditions, according to Zillow.

"Rate lock's hold seems to be loosening — homeowners who may have put off listing their homes are done waiting. But just as more choices sprang up for sale, buyers turned on cruise control," said Orphe Divounguy, Zillow senior economist. "Inflation has hit younger households hardest, and stubbornly high rates have pushed a mortgage out of reach for many first-time buyers. That has cooled competition for houses. If these trends hold, we're likely to see price growth flatten or tick down over the next year."

Even if homeowners decide to list, they may not necessarily be successful this summer. Sales this May were 6% lower than last year, according to Zillow. 

But buyers may have an easier time saving up for a down payment in the future, according to the report. Even though home prices are still 45% higher than pre-pandemic levels, values have declined slightly, and by May of next year, Zillow expects that home values will drop by 1.4%. 

A quarter of all homes on the market nationwide saw a price cut in May, the largest amount of homes to see a slash in six years. Zillow says its likely that buyers can snap up a lingering property for less than its listing price. 

A report from Redfin shows that more than three in five home listings in May have been sitting on the market for at least 30 days. Its agents say that turnkey homes in attractive neighborhoods are selling quickly, but many others are languishing. 

The amount of "stale" homes is 60% higher than in May of last year and roughly 50% higher over two years, Redfin says. 

Two in five listings from May, about 40%, have not received a contact in more than 60 days. Last year was no different, but the stat is nearly 28% higher than in 2022. Redfin economists say that number is likely to increase this month if rates stay high.