Mortgage Rates and Increasing Housing Inventory

The housing market is witnessing a surge in active listings, with a 36% year-over-year increase nationwide in August, according to Realtor.com. This marks the 10th consecutive month of annual growth in housing inventory.

• Despite the rise, supply is still 26% lower than pre-pandemic levels in August 2019.
• The increase in supply is attributed to homes staying on the market longer, as buyers and sellers await further declines in mortgage rates.
• Some cities are experiencing substantial inventory gains, with Tampa (90%), San Diego (80%), Miami (72%), Seattle (69%), and Denver (67%) leading the way.

Impact of Rising Mortgage Rates on Home Sales

The growth in housing inventory and fluctuations in mortgage rates are influencing home sales and buyer behavior.

• Applications for loans to buy a home are down about 4% compared to the same period last year, despite mortgage rates being around 75 basis points lower.
• Buyers and sellers are waiting for additional declines in mortgage rates before committing to transactions.

Regional Variations in Inventory Growth

The increase in active listings varies across different regions of the United States.

• The South experienced the highest growth, with a 46% rise in active listings.
• The West saw a 35.7% increase in inventory.
• The Midwest recorded a 23.8% growth in active listings.
• The Northeast had the lowest increase, at 15.1%.

Days on Market and Price Reductions

The surge in housing inventory is leading to longer selling times and price adjustments.

• The typical home spent 53 days on the market in August, an increase of seven days from the previous year and the slowest August pace in five years.
• The share of homes with price reductions rose to 19% in August, up 3 percentage points from the prior year.
• The median list price dropped by 1.3% year-over-year, partly due to a shift in the mix of homes on the market, with more smaller homes being listed.

Impact on Home Prices

While home prices are still significantly higher than pre-pandemic levels, the increase in housing inventory and changing market conditions are starting to affect pricing.

• Home prices in August 2022 were 36% higher than in August 2019, before the COVID-19 pandemic.
• However, the median list price declined by 1.3% year-over-year, indicating a potential cooling of the housing market.
• The shift in the mix of homes listed, with more smaller properties entering the market, is contributing to the overall price moderation.

Outlook for the Housing Market

The housing market is undergoing a gradual shift, with buyers and sellers closely monitoring mortgage rates and adjusting their strategies accordingly.

• Buyers are adopting a cautious approach, waiting for further declines in mortgage rates before committing to purchases.
• Sellers are increasingly open to price reductions as homes take longer to sell, reflecting the changing market dynamics.
• The interplay between mortgage rates, housing inventory, and buyer/seller behavior will shape the trajectory of the real estate market in the coming months.