The supply of homes for sale is currently on the rise in comparison to the same period last year. According to a recent report from Realtor.com, active listings in August have increased by 36%. This marks the 10th consecutive month of annual growth in inventory. Despite this positive trend, supply is still 26% lower than pre-pandemic levels in August 2019.
As the number of homes available for sale continues to climb, sellers are beginning to pull back. There were fewer new listings in August this year compared to the previous year, with a decrease of 1%. The increase in supply can be attributed to the fact that homes are staying on the market for longer periods. Consequently, price cuts are becoming more common, asking prices are stabilizing, and homes are taking longer to sell.
Interestingly, despite the availability of lower mortgage rates following the anticipated Fed rate cut, the data shows that applications for home purchase loans have decreased by about 4% compared to the same time last year. This suggests that some buyers are hesitant and waiting for further declines in mortgage rates before making a purchase decision.
While the increase in supply is a national trend, certain cities are experiencing more significant gains in inventory levels. For example, Tampa, Florida’s inventory is up by over 90% from a year ago, followed by San Diego (80%), Miami (72%), Seattle (69%), and Denver (67%). Regionally, active listings saw a 46% rise in the South, 35.7% in the West, 23.8% in the Midwest, and 15.1% in the Northeast.
The surge in inventory levels 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 previous year and the slowest pace for August in five years. According to Ralph McLaughlin, a senior economist at Realtor.com, for every 5.5 percentage point increase in the year-over-year number of active listings, the market tends to slow down by about one day. Consequently, some markets may experience up to 15-20 days longer on the market compared to the previous year.
The increase in supply and longer selling times are beginning to impact prices in the housing market. The share of homes with price reductions rose to 19% in August, an increase of 3 percentage points from the previous year. Additionally, the median list price decreased by 1.3% year over year. However, it’s essential to note that part of this price adjustment is due to the changing mix of homes being listed, particularly a rise in smaller homes. Despite the decrease, prices are still 36% higher compared to August 2019.
The current trends in the real estate market indicate a shift towards higher inventory levels, longer selling times, and a gradual impact on prices. This changing landscape presents both challenges and opportunities for both buyers and sellers navigating the evolving market conditions.