Inventory Rises as More Homeowners List and Buyers Take a Step Back
News releases from Zillow and Redfin put a spotlight on rising inventory levels as more homeowners list their homes while buyers take a step back.
Zillow’s release draws on its latest market report, which shows new listings outpacing home sales in May, easing both buyer competition and home price appreciation.
Homeowners may be less daunted by the lock-in effect from listing their homes this year, but buyers—particularly younger Millennial and Gen Z buyers and those earning less than the median household income—still face significant affordability challenges.
That said, the forecasted softening in home price growth, combined with the knowledge and proactive approach of a skilled real estate professional, could give more buyers the advantage they need to become homeowners in 2024, regardless of rates remaining near 7%.
NEW LISTINGS RISE 8% FROM APRIL AND 13% YEAR OVER YEAR
From April to May of 2024, new listings from sellers increased by a larger-than-average 8%, and the total figure now stands 13% above the previous year’s extremely low levels.
According to a Zillow survey of recent home sellers, around 80% were motivated by major life events, including marriage or having a child, and not so much by optimal financial conditions.
Ultimately, the lock-in effect can’t compete with real life motivators like the need for a bigger home (for a growing family), job relocations, and the desire to live closer to family.
That said, while we’re seeing an uptick in seller activity, buyers are less motivated, which is why sales in May were down 6% from the year before. But the cooling in buyer demand has helped drive up inventory numbers. The number of for-sale homes is up 22% compared to last year’s near record lows.
And while inventory is still 34% down from pre-pandemic norms, that gap is the smallest in over three years.
New listings increased the most year over year in West and South coastal markets (with a scattering of inland Western metros):
- San Diego, CA (+32.5%)
- Seattle, WA (+31.4%)
- Charlotte, NC (+30.4%)
- Raleigh, NC (+29.1%)
- San Francisco, CA (+29.0%)
- San Jose, CA (+28.5%)
- Phoenix, AZ (+26.6%)
- Tampa, FL (+24.7%)
- Denver, CO (+24.5%)
- Atlanta, GA (+23.4%)
- Las Vegas, NV (+23.1%)
Compared to 2023, total inventory grew the most in Florida markets, where a strong influx of new builds has helped fill the gap in housing supply. Month over month, buyers saw more active listings in every major metro except Miami.
DOWNWARD PRESSURE ON COMPETITION AND HOME PRICE GROWTH
As inventory has risen, buyer competition has eased, along with home price appreciation.
Annual price growth has slowed from a 4.4% rate in April to 3.9% in May (still a healthy rate), while monthly price growth has slowed from 1.2% in April to 0.8% in May.
That said, home prices are still up more than 45% compared to pre-pandemic levels.
Home prices have dropped year over year in New Orleans, Austin, and San Antonio, while price growth has been strongest in the Northeast and in coastal California markets.
Renters looking to buy a home but struggling to save for a down payment may get some relief from a modest decline in home prices. According to Zillow’s forecast, home prices will end 2024 up 0.4% year over year and decline by 1.4% through May 2025.
DAYS ON MARKET AND PRICE-CUTS HAVE INCREASED
As inventory ticks up, homes are spending more time on the market, even during the time of year known for ramped-up buyer activity. According to Redfin’s report, 61.9% of the homes on the market in May had been active for at least 30 days without going under contract.
That share has been increasing year over year since March 2024, when growth in new listings sped up while buyer demand has remained (relatively) subdued since mortgage rates started climbing in 2022.
More listings combined with slower buyer demand means homes are spending more time on the market, with less desirable homes spending the longest and some left without buyers.
That’s according to Redfin’s analysis of data going back through 2012, based on homes that were actively listed on the final day of the month.
Two in five homes on the market in May (40.1%) had been active for at least 60 days without going under contract. That figure is flat from a year ago and up from 27.8% in May 2022.
The percentage of homes spending at least 60 days on the market held steady year over year in both April and May 2024. Before that, this metric posted had annual declines since the previous September.
According to Redfin economists, the share of homes spending two months or more on the market is likely to start growing as long as mortgage rates remain high.
WHAT THIS MEANS FOR BUYERS AND SELLERS
So, what does this all mean for consumers?
For buyers, in particular, Zillow’s market heat index shows the national market heading into more buyer-friendly “neutral” territory, though sellers still have a slight advantage.
Among the 50 largest U.S. metros, the top markets for sellers are Buffalo, NY; Hartford, CT; and San Jose, CA.
Meanwhile, the metros most favorable to buyers are New Orleans, LA, as well as Miami, Jacksonville, and Memphis, FL.
About one-quarter of all the homes for sale nationwide had a price cut in May—the highest percentage in the last six years for this time of year.
Given that, buyers have a decent shot at buying a lingering property for under the asking price.
For both buyers and sellers, the current environment makes skilled and experienced agents all the more valuable:
- To find and negotiate home purchases for buyers
- To price and market homes effectively for sellers
Key Details:
- New reports from Zillow and Redfin highlight the origin and impact of inventory growth in 2024, as more homeowners list their homes while buyers take a step back, pushing inventory up and increasing days on market and the share of homes with price cuts.
- Zillow’s report focused on the steady increase in inventory as homeowners get over the lock-in effect and buyers continue to face affordability challenges.
- Redfin’s data shows 61.9% of homes on the market in May were active for 30 days or more without going under contract—up from 60% in May 2023 and about 50% in May 2022.
Posted by Sarah Lentz | Jun 17, 2024 | Housing Market
https://nowbam.com/inventory-rises-as-more-homeowners-list-and-buyers-take-a-step-back/
@ChuckBarberini - #ChuckBarberiniRealEstate - @ChuckBarberiniRealEstate
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