The real estate market in the United States is experiencing a significant increase in supply, as active listings in August were up 36% compared to the same month last year. This marks the 10th consecutive month of annual growth in supply, although it is still 26% lower than pre-pandemic levels in August 2019. The rise in inventory can be attributed to homes staying on the market for longer periods.
Danielle Hale, chief economist at Realtor.com, noted that as the number of homes on the market continues to climb, price cuts are becoming more common, asking prices are moderating, and homes are taking longer to sell. Some buyers and sellers are waiting for further declines in mortgage rates, despite the already lower rates resulting from the anticipated Federal Reserve rate cut.
Weekly mortgage data reveals that loan applications for home purchases are down about 4% compared to the previous year, despite the average rate on a 30-year fixed mortgage being significantly lower. This suggests that potential buyers are hesitant to make a move in the current market.
While supply is increasing in most cities, some are experiencing substantial gains. Tampa, Florida’s inventory has risen by more than 90% compared to the previous year, followed by San Diego (80%), Miami (72%), Seattle (69%), and Denver (67%). Regionally, active listings have seen a 46% increase in the South, 35.7% in the West, 23.8% in the Midwest, and 15.1% in the Northeast.
The growth in supply is resulting in homes taking longer to sell, with the typical home spending 53 days on the market in August. This is a seven-day increase from the previous year and the slowest August pace in five years. Ralph McLaughlin, senior economist at Realtor.com, explains that for every 5.5 percentage point increase in the year-over-year number of active listings, the market slows by about one day. With the current rapid growth in inventory, some markets could see up to 15-20 more days on the market compared to the previous year.
The increase in supply and longer selling times are finally having an impact on prices. In August, the share of homes with price reductions rose to 19%, a 3 percentage point increase from the previous year. The median list price was down 1.3% year over year. However, it’s important to note that prices are still 36% higher than they were in August 2019.
Overall, the real estate market in the United States is seeing a significant increase in supply, leading to longer selling times and lower prices. Buyers and sellers are navigating the market cautiously, with some waiting for further declines in mortgage rates before making a move. The current trends in supply and pricing indicate a shift towards a more balanced market, providing potential opportunities for both buyers and sellers.
