The real estate market is experiencing a shift as the supply of homes for sale is increasing rapidly. According to a report from Realtor.com, active listings in August were up by 36% compared to the same time last year. This marks the 10th consecutive month of annual growth. Despite this positive trend, supply remains 26% lower than pre-pandemic levels in August 2019. As inventory continues to grow, sellers are becoming more reluctant to list their homes. New listings in August were down by 1% compared to the previous year.
The increase in supply can be attributed to homes staying on the market for longer periods. This has led to more price cuts, moderation in asking prices, and extended selling times. Buyers and sellers are also adopting a wait-and-see approach, potentially in anticipation of further declines in mortgage rates. Weekly mortgage data indicates a 4% decrease in applications for home purchase loans compared to the previous year, despite significantly lower average mortgage rates.
While housing supply is on the rise across the nation, certain cities are witnessing substantial increases in inventory. Tampa, Florida leads with a surge of over 90% in available homes compared to last year. Other notable cities experiencing significant growth include San Diego (80%), Miami (72%), Seattle (69%), and Denver (67%). Regionally, the South saw the largest increase in active listings at 46%, followed by the West (35.7%), the Midwest (23.8%), and the Northeast (15.1%).
The influx of supply has resulted in longer selling times for homes. In August, the average days on the market increased by seven days compared to the previous year, marking the slowest August pace in five years. According to Ralph McLaughlin, a 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 trend could lead to properties spending an additional 15-20 days on the market compared to the previous year.
Market Response and Pricing Trends
The increase in supply and extended selling times have started to impact pricing dynamics in the housing market. The share of homes with price reductions rose to 19% in August, reflecting a 3 percentage point increase from the previous year. Additionally, the median list price decreased by 1.3% year over year. These changes may also be influenced by the composition of homes listed, with smaller properties becoming more prevalent. Despite these adjustments, prices remain significantly higher than they were in August 2019.
The real estate market is undergoing a period of transition with the rapid growth in housing supply. The impacts are being felt not only in inventory levels and selling times but also in pricing dynamics. As the market continues to adjust to these changing conditions, buyers and sellers alike will need to navigate a landscape that is evolving in response to shifting supply and demand trends.