Homebuyers willing to face today’s high mortgage rates might find solace in the increasing number of homes available on the market.
According to the latest monthly housing report from Realtor.com®, May marks the seventh consecutive month of growth in the overall number of homes for sale.
“The most striking observation is the sharp rise in inventory,” says Ralph McLaughlin, senior economist at Realtor.com. “There are 35.2% more homes on the market compared to last year, an incredible trend towards normalization.”
“Although the market still favors sellers, we expect it to shift towards a buyer-friendly environment as mortgage rates decline over the next year and the number of available homes continues to rise,” explains Sabrina Speianu, economic data manager at Realtor.com.
Home prices rose seasonally
As expected during the warmer months, the national median list price increased seasonally by 0.3% to $442,500 in May, compared with $430,000 in April. Last year’s median list price for May was $441,000.
The steady rise in home prices is attributed to an influx of affordable homes entering the market.
“The inventory of lower-priced homes is increasing more rapidly than other segments,” says McLaughlin. “There are 46.6% more homes in the $200,000 to $350,000 range, a welcome change for price-constrained buyers.”
In addition to list prices, buyers and sellers should consider the median list price per square foot, which rose by 52.7% this May compared with May 2019.
“The price-per-square-foot metric is crucial as it provides a more accurate measure of home value over time compared to changes in median list price,” notes McLaughlin.
Sellers who purchased homes before the COVID-19 pandemic have further reason to rejoice: the typical listed home price this May increased by a significant 37.5% compared to May 2019.
Impact of high mortgage rates on housing
Despite rising listings, high mortgage rates have deterred some potential sellers.
This May saw 6.2% more new homes for sale than the same month last year, although this is nearly half of April’s 12.2% growth rate in new listings.
“Sellers, many of whom are also buyers, have approached the rising mortgage rates with caution,” says Speianu. “The growth in newly listed homes has dipped, yet remains higher than the previous year.”
Should mortgage rates drop as expected, more sellers are likely to enter the market.
“We anticipate selling activity to normalize as rates gradually decline over the next year,” Speianu adds.
Overall listing levels rise in major US cities
In May, all four US regions saw an increase in active housing stock compared to the previous year.
The South led with a 47.2% year-over-year growth in listings, followed by the West at 34.5%, the Midwest at 20.5%, and the Northeast trailing at 9.4%.
The number of homes for sale also rose in all of the 50 largest metropolitan areas compared to last year.
Tampa, FL (+87.4%), Phoenix (+80.3%), and Orlando, FL (+78.0%) saw the most significant growth in homes on the market.
“These markets thrived during the pandemic frenzy, with a significant shortage of inventory,” says McLaughlin. “The current growth in inventory suggests these markets are returning to normal as the market rebalances.”
Only 12 of the 50 largest metro areas saw higher inventory levels in May compared to the typical levels from 2017 to 2019. However, this is an improvement from only seven metros last month.
Top metros with housing stock above pre-pandemic levels were primarily in the South and West, including Austin, TX (+33.6%), San Antonio, TX (+31.8%), and Denver (+22.0%).
Despite the improvements in listings compared to the past three years, “current levels are still down 34.2% compared to typical levels from 2017 to 2019,” explains Speianu.
Homes continue to sell quickly
In May, the typical home spent 44 days on the market, one day longer than last year.
The increase in supply likely contributed to the slight extension in the time homes spend on the market.
“May is the second consecutive month where homes took longer to sell compared to the previous year due to growing inventory and sluggish home sales,” says Speianu. “However, the time a typical home spends on the market is still eight days shorter than the average May from 2017 to 2019.”
