US Housing Market Sees Shift as Inventory Climbs, Prices Moderate
The US housing market is experiencing a significant shift, with a surge in inventory after years of scarcity. According to a new report from Realtor.com, active listings nationwide jumped 36% in August compared to the same month last year, marking the 10th consecutive month of annual growth. While inventory is still 26% lower than August 2019 (pre-pandemic), this marked increase signals a change in market dynamics.
Key Takeaways:
- Inventory Surge: Active listings have risen for 10 consecutive months, with August marking a 36% year-over-year increase.
- Sellers Pulling Back: Fewer new listings appeared in August, indicating sellers are becoming more cautious amid the growing inventory.
- Longer Selling Times: Homes are staying on the market longer, with the typical home spending 53 days in August, up seven days from the previous year.
- Price Moderation: More homes are experiencing price reductions, and the median list price declined 1.3% year-over-year, though still higher than pre-pandemic levels.
The Impact of Rising Inventory
The increase in inventory is a direct result of homes staying on the market longer. While the supply is still considered low by historical standards, the growing number of properties available for sale is leading to a more balanced market.
"This August, as the number of homes on the market continues to climb, price cuts are more common, asking prices are moderating, and homes are taking longer to sell," states Danielle Hale, chief economist at Realtor.com. "The widely anticipated Fed rate cut has already ushered in lower mortgage rates, but it seems that some buyers and sellers are waiting for additional declines."
This trend is evident in weekly mortgage data. Despite a 75 basis point decline in the average 30-year fixed mortgage rate compared to last year, loan applications for home purchases are down roughly 4%. This suggests that some potential buyers and sellers are choosing to wait for further market adjustments before making a move.
Regional Variations in Inventory Growth
While the national picture shows a significant rise in inventory, specific regions are experiencing even more dramatic changes.
Dramatic Gains in Specific Cities
Cities like Tampa, Florida, have seen an extraordinary 90% surge in inventory year-over-year. Other notable gains include:
- San Diego: +80%
- Miami: +72%
- Seattle: +69%
- Denver: +67%
Regional Inventory Growth
The regional distribution of inventory growth is also uneven, with the South experiencing the most significant increase at 46%, followed by the West (35.7%), Midwest (23.8%), and Northeast (15.1%).
The Impact of Longer Selling Times
As inventory grows, homes are naturally spending more time on the market. The median time on market in August reached 53 days, the slowest August pace in five years. This increase is attributed to the growing supply, prompting sellers to adjust their expectations and potentially lower their asking prices.
"We have found that the market slows by about one day for every 5.5 percentage point increase in the year-over-year number of active listings," explains Ralph McLaughlin, senior economist at Realtor.com. "Given the rapid growth in inventory we’re seeing now, that can mean changes in some markets of up to 15-20 more days on the market than last year."
Moderating Prices and Market Outlook
The combined impact of rising inventory and longer selling times is leading to price moderation. The share of homes with price reductions climbed to 19% in August, a 3 percentage point increase from the previous year.
While the median list price dipped 1.3% year-over-year, it is still 36% higher than August 2019. This decline can partly be attributed to the mix of homes on the market, with more smaller properties being listed.
The current market signals a shift towards a more balanced environment, with less intense competition among buyers and more leverage for buyers in negotiations. However, it remains crucial to acknowledge that market conditions can vary significantly across regions and property types.
"While the housing market is cooling off, it’s not crashing," notes Hale. "It’s simply returning to a more normal level of activity." As the market continues to adjust, buyers and sellers will need to adapt their strategies to navigate the evolving landscape.