Homebuyers willing to brave today’s high mortgage rates might at least be delighted to find that they have plenty of homes to consider.
In the latest monthly housing report from Realtor.com®, the overall number of homes for sale in May marks seven months of growth.
“The biggest eye-catcher for me is the fact that inventory is rising sharply,” says Realtor.com senior economist Ralph McLaughlin. “There are 35.2% more homes on the market than this time last year, an incredible trend in the direction of normality.”
“While the housing market is still in the seller’s territory, it is expected to shift in a buyer-friendly direction as mortgage rates resume their decline over the next year and the number of homes for sale increases,” says Realtor.com economic data manager Sabrina Speianu.
Home prices rose seasonally
As is typical in the housing market’s warmer months, the national median list price continued to increase seasonally by 0.3% to $442,500 in May, compared with $430,000 in April. (Last year’s May median list price was $441,000.)
Moderately steady home prices are due to a rising number of affordable homes hitting the market.
“The inventory of lower-priced homes is rising faster than other segments,” says McLaughlin. “There are 46.6% more homes on the market in the $200,000 to $350,000 range, something inventory and price-constrained buyers will surely welcome.”
In addition to the list price, buyers and sellers might want to examine 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 an important one to pay attention to because the change in that metric is a more solid measure of how much more a home is worth over time than looking at changes in median list price,” says McLaughlin.
And here’s more good news for sellers who bought before the COVID-19 pandemic: Namely, the typical listed home price this May grew by a whopping 37.5% compared with May 2019.
How high mortgage rates have hit housing
Although listing levels are rising overall, high mortgage rates have kept some sellers on the sidelines.
This May saw 6.2% more fresh homes for sale than this same month last year. But that’s almost half of April’s new listings levels, which saw a 12.2% growth rate.
“Sellers—who are often buyers themselves—responded to rising mortgage rates with some caution,” says Speianu. “The growth in newly listed homes dipped, although newly listed homes still remained higher than the previous year.”
And if mortgage rates drop later on as anticipated, more sellers are bound to jump into the market.
“We expect selling activity to normalize as rates inch their way down over the next year,” says Speianu.
Listings levels are up overall in the biggest US cities
In May, all four regions of the US saw active housing stock grow over the previous year.
The South continues to lead as the region with the most listing growth year over year, hitting 47.2% in May.
The West saw a 34.5% growth in the number of homes for sale, while the Midwest saw a 20.5% increase. The Northwest was far behind the rest of the country, with growth coming in at 9.4%.
The number of homes for sale also increased in all of the 50 largest metros compared with last year.
The metros with the most growth in homes on the market were Tampa, FL (+87.4%), Phoenix (+80.3%), and Orlando, FL (+78.0%).
“These markets were booming during the [COVID-19] pandemic frenzy, and homebuyers couldn’t get enough inventory during those years,” says McLaughlin. “But the growth in inventory now suggests those markets are normalizing as the pendulum swings back in the opposite direction.”
Only 12 of the 50 largest metro areas saw higher inventory levels in May compared with typical 2017 to 2019 levels. However, it’s important to note that this figure is up from only seven metros last month.
The top metros with housing stock above pre-pandemic levels were mostly in the South and West and included Austin, TX (+33.6%), San Antonio, TX (+31.8%), and Denver (+22.0%).
While listings levels this May are much improved compared with the previous three years, “it is still down 34.2% compared with typical 2017 to 2019 levels,” explains Speianu.
Homes continue to sell quickly
The typical home spent 44 days on the market this May, which is one day extra compared with last year.
A greater supply of homes on the listing pages might be the reason it took homes slightly longer to sell.
“May marks the second month in a row where homes spent more time on the market compared with the previous year as inventory continues to grow and home sales remain sluggish,” says Speianu. “However, the time a typical home spends on the market is eight days less than the average May from 2017 to 2019.”
