Housing supply grows as mortgage rates affect sales

The usually hot summer housing market cooled last month, likely due to persistently high mortgage rates.

A new report by Realtor.com® found that the number of homes actively for sale in August was 36.2% higher than the previous year, marking the 10th consecutive month of growth.

That means the number of listings is “now at its highest level since May 2020,” says Realtor.com senior economist Ralph McLaughlin in his recent analysis.

Buyers have not only more choices but also more bargain-friendly homes to consider. In August, 19.3% of listings saw price reductions, the highest amount for an August since 2018.

“A growing number of homes on the market and rising share of price cuts indicate that today’s housing market isn’t as heavily tipped toward sellers as it has been in recent years,” says Realtor.com Chief Economist Danielle Hale.

“Sellers are increasingly showing patience and modesty—something buyers haven’t much experienced in the post-pandemic housing market,” McLaughlin adds.

High mortgage rates have slowed the housing market considerably over the summer months. Mortgage rates fell in August to their lowest level—6.35%—in 18 months on lower-than-expected job growth in July. Yet that number might not be low enough to tempt some budget-minded buyers just yet.

With “expectations that the Federal Reserve will cut rates three times this year, it’s likely that some potential buyers are sidelining themselves until rates come down further,” says McLaughlin.

With price reductions up in August, median home prices fell from $439,950 in July to $429,995.

“We’ve seen more sellers listing homes for sale compared with the prior year,” says Hale. “The buildup of sellers at the same time that many buyers are pressing pause has led to a shift in market balance, and more sellers are calibrating their price to reflect this.”

But despite the overall decline in national median list prices, all prices didn’t decrease technically.

“When a change in the mix of inventory toward smaller homes is accounted for, the typical home listed this year has increased in asking price compared with last year,” says McLaughlin.

Last month, as in previous months, growth in homes priced between $200,000 and $350,000 outpaced other categories as inventory grew by 45.1% year over year, particularly in the South.

As a result, median price per square foot increased by 2.3% compared with last year and by 50.9% compared with July 2019.

Homebuyers who did enter the tepid market last month had many more options across all four U.S regions: South (46%), West (35.7%), Midwest (23.8%), and Northeast (15.1%).

Metros with significant increases included Tampa (91.1%), San Diego (80.1%), and Orlando (75.7%).

While overall housing stock rose, newly listed homes dropped by 0.8%, breaking a nine-month streak of increasing listing activity.

“There are a couple of factors driving this August slowdown," says Hale pointing to volatile mortgage rates creating "uncertainty among potential sellers."

Freshest housing choices were noted primarily in South and West regions while new listings dropped significantly elsewhere.

Metros like Cincinnati (31.1%), Seattle (29.2%), and San Diego (22%) saw notable increases.

McLaughlin anticipates an increase soon saying "sharp decrease seen mid-August could lead rise coming months enticing marginal homeowner sell."

Home sales remained slow; typical home spent average fifty-three days on-market seven days longer than previous-year marking slowest five-years adding breathing room offer-making process reflected clearly less frenzied Hale notes closing analysis buyer-seller dynamics shifting favorably towards cautious hopefuls observing awaiting optimal opportunities amid fluctuating conditions concluding marked adjustments forthcoming quarters expected stabilize pricing availability equilibria moving forward