The real estate market has seen a significant increase in home listings recently, with active listings in August up by 36% compared to the same month last year. This marks the 10th consecutive month of annual growth in home inventory. Despite this positive trend, the supply of homes for sale is still 26% lower than pre-pandemic levels in August 2019. This surge in inventory is causing sellers to take a step back, as there were fewer new listings in August compared to the previous year.
Impact on Pricing and Selling Time
As more homes are hitting the market, they are staying on the market for longer periods. The typical home spent 53 days on the market in August, an increase of seven days from the previous year. This slowdown in selling time can be attributed to the increase in home inventory. Market experts have noted that for every 5.5 percentage point increase in the year-over-year number of active listings, the market slows by about one day. This has translated into longer selling times in some markets, with homes staying on the market 15-20 days longer than the previous year.
While the rise in home inventory is a nationwide trend, some cities are experiencing greater increases than others. Cities like Tampa, San Diego, Miami, Seattle, and Denver have seen inventory gains ranging from 67% to over 90% compared to the previous year. Regionally, active listings have risen by 46% in the South, 35.7% in the West, 23.8% in the Midwest, and 15.1% in the Northeast. This uneven distribution of inventory growth highlights the varying market conditions across different regions.
The increase in supply and longer selling times have begun to impact pricing in the real estate market. The share of homes with price reductions rose to 19% in August, up 3 percentage points from the previous year. Additionally, the median list price was down by 1.3% year over year. However, prices are still significantly higher than they were in August 2019, showing that there is still demand for homes despite the increase in inventory. This shift in pricing dynamics can also be attributed to the mix of homes being listed, with more smaller homes entering the market.
Market experts have noted that the widely anticipated Fed rate cut has led to lower mortgage rates, yet buyers and sellers seem to be waiting for further declines before making moves. Weekly mortgage data shows a decrease in applications for home loans compared to the previous year, despite the lower average rate on 30-year fixed mortgages. This cautious approach by buyers and sellers reflects the uncertainty surrounding economic factors and their impact on the real estate market.
The rise in home inventory is having a profound impact on the real estate market, with a slowdown in selling times, price reductions, and regional variances in inventory growth. As the market continues to evolve, both buyers and sellers will need to adapt to changing conditions and adjust their strategies accordingly. The impact of economic factors on the market remains uncertain, but it is clear that the shift in inventory levels is reshaping the dynamics of the real estate industry.