In recent months, the real estate market has witnessed a significant increase in the supply of homes for sale. According to a report from Realtor.com, active listings in August saw a 36% increase compared to the previous year, marking the 10th consecutive month of annual growth. Despite this positive trend, inventory levels remain 26% lower than pre-pandemic levels in August 2019. The rise in supply can be attributed to homes staying on the market for longer periods, leading to more price cuts, moderated asking prices, and extended timeframes for selling.
As inventory levels continue to surge, sellers are beginning to pull back from the market. The report highlights a decrease in new listings in August (-1%) compared to the previous year, indicating a sense of caution among property sellers. Furthermore, data from the Mortgage Bankers Association shows a 4% decline in loan applications for home purchases, despite a substantial drop in mortgage rates. It appears that potential buyers and sellers are adopting a wait-and-see approach, anticipating further declines in the market.
While the increase in supply is evident across most cities, certain regions are experiencing more significant gains than others. Cities like Tampa, San Diego, Miami, Seattle, and Denver have seen inventory levels soar by as much as 90% compared to the previous year. Regionally, the South witnessed a 46% rise in active listings, followed by the West at 35.7%, the Midwest at 23.8%, and the Northeast at 15.1%. This surge in supply has resulted in longer selling times, with homes spending an average of 53 days on the market in August, up by seven days from the previous year.
The abundant supply and extended selling times are leading to adjustments in prices, with more homes seeing price reductions in August. The share of homes with price cuts rose to 19%, representing a 3-percentage point increase from the prior year. The median list price also decreased by 1.3% year over year. However, it is important to note that the mix of homes available on the market, particularly a higher proportion of smaller homes, is influencing these price changes. Overall, prices are still significantly higher than they were in August 2019, soaring by 36% over the past year.
Whether these market trends will persist or evolve over time remains to be seen. The real estate landscape is undoubtedly undergoing a period of transition, with shifting dynamics between supply, demand, and pricing. Buyers and sellers alike must navigate these changing conditions carefully to make informed decisions in the current market environment.