The housing market has been witnessing an interesting shift in recent times. While the supply of homes for sale is still lower than historical standards, it is on the rise. According to a report from Realtor.com, active listings in August saw a significant increase of 36% compared to the same month last year. This marks the 10th consecutive month of annual growth in housing inventory. However, despite this increase, supply is still 26% lower than it was in August 2019, before the pandemic struck.
Trends in Seller Behavior
As the inventory of homes continues to climb, sellers seem to be pulling back in some markets. In August, there were fewer new listings (-1%) compared to the previous year. This trend can be attributed to the fact that homes are staying on the market longer. Price cuts are becoming more common, asking prices are moderating, and homes are taking longer to sell.
Market Response to Lower Mortgage Rates
Lower mortgage rates, resulting from the widely anticipated Fed rate cut, have not led to the surge in buying activity one might expect. Weekly mortgage data shows that applications for loans to buy a home are down approximately 4% compared to the same time last year, despite mortgage rates being significantly lower.
While the increase in housing supply is a national trend, some cities are experiencing more significant gains than others. For example, Tampa, Florida, has seen its inventory shoot up by over 90% compared to a year ago. Similarly, San Diego, Miami, Seattle, and Denver have witnessed substantial increases in housing inventory. Regionally, the South saw the largest increase in active listings at 46%, followed by the West at 35.7%, the Midwest at 23.8%, and the Northeast at 15.1%.
Impact on Housing Market Dynamics
The influx of supply has led to homes spending more time on the market. In August, the typical home stayed on the market for 53 days, which is seven days longer than the same month a year ago. This indicates a slowing down of the market, with some markets experiencing up to 15-20 more days on the market compared to last year for every 5.5 percentage point increase in active listings.
The increase in housing inventory and longer selling times are starting to have an impact on prices. The share of homes with price reductions rose to 19% in August, up 3 percentage points from the previous year. The median list price also saw a decrease of 1.3% year over year. However, it is essential to note that part of this decline can be attributed to a shift in the mix of homes being listed, with more smaller homes entering the market. Prices are still significantly higher, with a 36% increase compared to August 2019.
The rising housing inventory is reshaping the dynamics of the real estate market. Sellers are facing challenges as homes are taking longer to sell, leading to price reductions in some cases. While buyers may benefit from more choices and moderating prices, the long-term implications of this trend remain uncertain. Only time will tell how the real estate market will adapt to these changing conditions.