The week ending July 9 saw active inventory in the housing market continue to grow at a double-digit annual pace, even as new sellers took a step back from the market around the 4th of July holiday.
“This year’s summer housing markets are feeling the heat of record-high home prices on top of scorching inflation at a 40-year high,” said George Ratiu, senior economist and manager of economic research for Realtor.com. “As households pay much more for cars, clothing, food, gasoline and services, there are fewer dollars left over from each paycheck at a time when housing affordability is a growing challenge.”
For a household with a $75,000 income, only 23% of homes on the market are affordable, down from 50% of inventory in 2018,” said Ratiu. “While these trends are resulting in a cooler summer home buying season than usual, the road ahead points towards a promising shift, away from 2021’s severe undersupply and win-at-all-costs competition. As the Fed continues to fight inflation, borrowing costs will keep rising, cooling demand at a time when we’re seeing more homes for sale. In turn, prices will continue to adjust to a new equilibrium.”
The median listing price advanced by 15.9% over last year, in its 30th consecutive week of double-digit yearly gains. However, listing price growth is moderating, moving below the pace seen in late May and early June. With softening demand and rising supply, Realtor.com expects to see home price growth continue to ease in the second half of 2022.
New listings—a measure of sellers putting homes up for sale—declined 6% from one year ago, reflecting a pullback in seller activity over the Independence Day holiday. Still, more homes have come up for sale this year compared to a year ago in 13 of the last 16 weeks, a trend that is expected to return. Many homeowners are ready to pursue Covid-delayed plans to sell, while capitalizing on still-high prices.
Active inventory continued to grow, rising 28% above one year ago. The shift in supply is due to several weeks of new listings coming online, boosting the inventory level almost a third higher than a year ago. Additionally, houses are also spending longer on the market in many large metro areas, contributing to a boost in homes for sale. The report found that real estate markets remain undersupplied compared with 2019, but they are moving in the right direction.
Homes spent just one day less on the market than this time last year. The pace of transactions is moderating noticeably as higher prices and interest rates take a toll on demand. At this rate, Ratiu said homes will start lingering longer on the market and sellers will have to contend with more competition.