The real estate market is experiencing a shift as the supply of homes for sale is on the rise. According to a recent report from Realtor.com, active listings in August saw a 36% increase compared to the same month last year, marking the 10th consecutive month of annual growth. Despite this positive trend, supply still remains 26% lower than pre-pandemic levels in August 2019. As more homes enter the market, sellers are becoming more cautious, leading to a decrease in new listings by 1% from the prior year.
Market Shifts and Economic Influences
The growth in inventory can be attributed to homes spending longer periods on the market, resulting in more price cuts and moderating asking prices. Danielle Hale, chief economist at Realtor.com, noted that lower mortgage rates following the Fed rate cut have influenced buyer and seller behavior, with some individuals waiting for further declines in rates. This hesitation is reflected in the weekly mortgage data, showing a 4% decrease in loan applications for home purchases compared to the previous year, despite significantly lower interest rates.
While supply is increasing across most cities, certain regions are experiencing substantial gains in inventory. Tampa, Florida’s housing stock has surged by over 90% year-over-year, followed by San Diego at 80%, Miami at 72%, Seattle at 69%, and Denver at 67%. Regionally, the South has seen the largest rise in active listings at 46%, with the West, Midwest, and Northeast also showing significant increases at 35.7%, 23.8%, and 15.1% respectively.
With more homes available for sale, properties are taking longer to sell, with the average home spending 53 days on the market in August – an increase of seven days from the previous year. According to Ralph McLaughlin, senior economist at Realtor.com, for every 5.5 percentage point increase in active listings, the market slows by about one day. This rapid growth in inventory has resulted in some markets experiencing delays of up to 15-20 days compared to last year.
Shift Towards Lower Prices
The increase in supply and longer selling times are starting to have an impact on prices, as noted by a rise in the share of homes with price reductions to 19% in August. The median list price saw a decrease of 1.3% year-over-year, partially due to a shift in the types of homes being listed, with more smaller properties entering the market. Despite these changes, prices still remain 36% higher than in August 2019, illustrating the overall resilience of the real estate market.
The real estate market is undergoing significant transformations as inventory levels continue to rise, leading to longer selling times and lower prices in certain areas. Buyers and sellers are adapting to changing economic conditions and mortgage rate fluctuations, which are influencing market dynamics. It will be essential for industry professionals and consumers alike to closely monitor these trends and adjust their strategies accordingly to navigate the evolving real estate landscape.