The supply of homes for sale in the real estate market is on the rise, marking the 10th straight month of annual growth. Nationwide, active listings in August were up by a significant 36% compared to the same month last year. However, despite this growth, supply is still 26% lower than in August 2019, pre-pandemic. The increase in supply can be attributed to the fact that homes are staying on the market for longer periods of time.
As inventory grows, sellers are beginning to pull back. There were fewer new listings in August, down by 1%, compared to the previous year. This decrease in new listings comes at a time when price cuts are becoming more common, asking prices are moderating, and homes are taking longer to sell. The changes in the market have led some buyers and sellers to wait for further declines in mortgage rates before making a move.
While supply is increasing in most cities, some areas are seeing significant gains in inventory. Cities like Tampa, Florida, San Diego, Miami, Seattle, and Denver have experienced inventory increases ranging from 67% to over 90% compared to the previous year. Regionally, active listings rose by 46% in the South, 35.7% in the West, 23.8% in the Midwest, and 15.1% in the Northeast.
The increase in supply and longer selling times in the real estate market is beginning to impact prices. The share of homes with price reductions rose in August to 19%, up by 3 percentage points from the prior year. The median list price was down by 1.3% year over year. This decrease in prices is partly due to the mix of homes on the market, as more smaller homes are being listed. However, prices are still 36% higher than in August 2019.
The typical home spent 53 days on the market in August, an increase of seven days from the previous year. This slowdown in the market can be attributed to the rapid growth in inventory. According to Ralph McLaughlin, senior economist at Realtor.com, for every 5.5 percentage point increase in the year-over-year number of active listings, the market slows by about one day. This can result in changes of up to 15-20 more days on the market in some markets compared to the previous year.
Despite lower mortgage rates, applications for loans to buy a home are down by about 4% compared to the same time last year. This trend is surprising given the significant decrease in the average rate on a 30-year fixed mortgage compared to the previous year. It seems that some buyers are adopting a wait-and-see approach, potentially in anticipation of further declines in mortgage rates.
The real estate market is currently in a state of transition, with supply on the rise and prices beginning to adjust accordingly. Sellers are pulling back as homes stay on the market for longer periods, leading to price reductions and changes in market dynamics. It will be interesting to see how the market continues to evolve in the coming months as buyers and sellers navigate these changing conditions.
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