The real estate market seems to have a split personality.
On the positive side for homebuyers, the number of properties for sale shot up by a record-setting 30.7% this July compared with the same month last year, according to a recent Realtor.com® report. That’s the most significant increase in active listings in the data’s history. And in another hopeful sign for buyers, the share of homes seeing their prices slashed—19.1%—hit a record not seen since 2019.
Yet on the flip side, the $449,000 median list price of homes is a 16.6% increase compared with last year. And the average time a home spends on the market before it sells remains significantly lower (a mere 35 days) than in pre-pandemic times.
So how does a savvy homebuyer make sense of this seemingly competing mix of good and bad news?
“Anytime you are at a pivot point, indicators can appear to diverge as each one picks up the market shift in a slightly different way and at a slightly different time,” says Danielle Hale, chief economist of Realtor.com. “But when you put it all together, you see a housing market going from white-hot to just about room temperature.”
Certain metropolitan areas sizzled during the height of COVID-19. As a result, prices skyrocketed and available homes became scarce. Yet now, those markets are seeing a significant uptick in properties for sale.
Overall, the number of homes for sale in the 50 largest U.S. metros jumped 41% in July. (Metros include the central city, surrounding suburbs, towns, and smaller urban areas.) That percentage means buyers had 176,000 more houses to choose from than last year.
Some metros that experienced booming demand during the pandemic saw a massive spike in the number of homes hitting the market in July. Need proof? Inventory in the boom towns of Phoenix; Austin, TX; and Raleigh, NC, jumped 158.7%, 154.5%, and 137.5%, respectively.
“Phoenix is seeing a large increase in active listings at the moment,” says Adam Gitter, a real estate professional with The Brokery in Phoenix. “I’m advising sellers to anticipate a longer time on the market. The days of multiple offers within the initial days of a listing may be their expectation. But patience is key in today’s market, even when a home is priced and marketed well.”
So do these formerly impenetrable metros seeing such a massive rise in inventory foretell a shift from a raging seller’s market to a buyer’s market at long last?
Not exactly.
“What we’re seeing with these huge inventory spikes is a quick return to what was normal,” explains Hale. “These huge growth numbers illustrate just how far away from that level these areas had gotten over the past couple of years.”
In other words, the number of homes for sale is slowly returning to what it was in 2019. However, the number of active listings in July was still 45.4% lower than the pre-pandemic 2017 to 2019 average.
As the market slowly regains equilibrium, aspects of the homebuying process remain off-kilter.
“The big question is: Does this adjustment or rebalancing continue beyond buyer-friendly and into a real buyer’s market territory?” asks Hale. “That’s possible, but I don’t think that adjustment will happen nearly as quickly.”
So while home shoppers have many more active listings to peruse, the time a home lingers on the market continues to remain low. In July, homes spent 26 fewer days on the market compared with typical pre-pandemic levels.
Chalk this rush up to affordability. Mortgage rates may have recently dropped to an average of 4.99%, yet many buyers fear the number will start rising soon enough. And the threat of even higher costs provides a strong impetus to buy as soon as possible.
In addition, summer is generally a busy homebuying season, as families rush to buy a home and settle in before the back-to-school whirl hits.
Home shoppers who have the time to keep looking and solid financials to weather another rate hike might catch a break come autumn. The housing stock is projected to grow in the coming weeks, meaning buyers may have more choices and face less competition.
Yet buyers can still expect to pay a premium for their homes. While median home prices are indeed falling slightly ($1,000) from June’s record high of $450,000, the slash in prices has yet to cut into the tremendous steady climb home prices have seen over the past few years.
“Home shoppers are likely to see the current wave of market rebalancing line up with the usual seasonal cooling in the housing market,” says Hale. “In order to be prepared to take advantage of market conditions, buyers need to be financially ready, as both prices and mortgage rates are expected to remain relatively high.”
Source: realtor.com
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