It’s really happening! After months and months of doom and gloom surrounding real estate, we finally have some good news.
According to the latest data from realtor.com, the number of listings coming onto the market has increased since the start of the year:
Last month, U.S. housing inventory was 12% lower than the same month last year, which is the smallest year-over-year decline since December 2019 according to Realtor.com’s Monthly Housing Trends Report. This 12% drop amounted to 57,000 fewer homes actively for sale on a typical day in April compared to the previous year.
The April inventory decline is a smaller rate of decline compared to a nearly 19% drop in March. In the final week of April, active listings were only down 3.4% on a year-over-year basis.
If this trend continues, the housing market could see year-over-year listings finally peek out of the negative in the coming weeks.
Active listings isn’t the only metric that could forecast a softening market. According to a study by Redfin, more sellers are dropping their asking prices.
The report shows that the share of home sellers who dropped their asking price shot up to a six-month-high of 15% for the four weeks ending May 1, up from 9% a year earlier. The 5.9% increase is the largest annual gain on record in Redfin’s weekly housing data back through 2015.
What’s Driving This Trend?
The increase in housing supply is likely due to slower homes sales resulting from the recent increase in mortgage rates.
Since the start of the year, the average rate on a 30-year fixed mortgage has jumped more than 2% in response to inflation and the actions taken by the Federal Reserve to combat it. Home prices are also up an average of 31% nationwide since the start of the pandemic.
These high prices are working with the increasing rates to sideline much of the competition in the market and slowdown bidding wars. Since affordability is being throttled, some sellers have realized they need to lower their asking prices in order to get the deal done.
The lack of inventory over the past two years has created a pileup of would-be buyers. Even as rates price out some of those buyers, there are others waiting to take their place. It will take time to work through the pent-up demand, but once we do, the housing market is likely to cool even further.
What This Means For You
While a low-inventory market is difficult to navigate as a buyer, the growing number of new listings means there is hope! More sellers are expected to list their homes in the coming months, which is great news if you are having a hard time finding a home that fits your needs.
However, it’s important keep in mind that those new listings are going to go fast. The lack of inventory over the past two years has created a pileup of would-be buyers. Even as rates price out some of those buyers, there are others waiting to take their place.
Our advice is to not let high interest rates scare you out of the market. Buyers pulling back opens the door for you to be able to submit a winning offer without the threat of a bidding war and the need to pay well over asking price.
Even if you don’t think you are able to afford a home right now, it would be wise to meet with a mortgage advisor and have them run some pre-approval numbers for you. They will be able to show you exactly how much home financing you qualify and what your monthly payment will be with the current interest rates. They will also be able to show you how much equity you will gain in the coming years and how much you will be able to save when interest rates decrease in the future.