Realtor.com®’s June data shows inventory growth in the U.S. housing market continues to decelerate and is trending toward renewed declines. However, the time properties spend on the market is now 2 days more than last year. The nation’s median listing price continues to increase but at a slower rate.
The 10-month run-up of rising inventory has spurred sellers to re-adjust their price expectations. In June, the number of homes with price reductions increased by 8.7 percent compared to the previous year. This means that 1 in 5 homes on the market this June had a price cut, compared to 1 in 6 last June.
As a result, the rate of growth in the nation’s median list price has tempered. The nationwide median home list price has reached $316,000, 5.6 percent higher than a year ago. However, the rate of increase is slower than last June, when the median list price grew by 8.7 percent. In addition, June’s listing price growth is the slowest on record since April 2015.
Meanwhile, housing inventory continues to increase at the national level but at a decelerating pace. The national inventory grew by 2.8 percent year-over-year in June, amounting to approximately 40,000 additional listings. This is a deceleration compared to last month when the yearly national growth rate was 2.9 percent. Part of this deceleration of inventory growth is attributed to fewer newly listed homes, as the count of newly listed properties has decreased by 2.3 percent compared to last year.
Without as many fresh, newly listed properties coming up for sale, and with buyers continuing to browse even if sales are not increasing much yet, the trend of increasing inventories has slowed and could turn into renewed inventory declines as early as this fall. If that were to happen, overall inventories would eventually approach the lows seen in January 2018, but are likely to remain slightly above that level.
The median age of properties on realtor.com in June reached 56 days, spending 2 more days on the market compared to last year. The time a typical property spends on the market has followed but lagged inventory growth. As inventory once again approaches a declining trend, properties are expected to resume selling more quickly in the coming months.
Why aren’t we seeing more newly listed properties come up for sale?
While data shows that many people believe now is a good time to sell a home and that this share has increased in the most recent quarter, we have not yet seen this translate into more properties newly available for sale. A multitude of explanations has been offered.
Rate-lock is one likely contributing factor. When a household is rate-locked, it means that they have a lower rate on their existing mortgage than the currently prevailing market rate. For trade-up sellers, in addition to likely paying more money for more space, the cost of any money borrowed will be higher than they are currently paying, and the differential may be too much for many households to make the move. They may choose to stay put and remodel instead. For downsizers, the savings from downsizing may not match expectations because of higher mortgage rates. In the last eight years, rates have spent half of their time above 3.97 percent- according to weekly data from Freddie Mac- so this phenomenon is likely more common when rates are above 3.97 percent, as they were in most of 2018 and until June this year, versus below that point.
Healthy longevity and aging in place is another likely culprit. As Boomers and older generations live longer, healthier lives, they are choosing to stay in the homes they own, according to research from Freddie Mac. In addition, a previous realtor.com survey indicated buyers didn’t plan to sell their homes because their current home fits their needs.
One other potential explanation is economic uncertainty. A spring survey from realtor.com showed that 70 percent of active home shoppers expected a recession by 2022, but were not letting this deter their buying plans. Those who were not actively shopping for a home may hold a similar assessment of the economy and it could affect their decisions to move. Additionally, consumer indicators such as consumer confidence have moved lower in recent months as the Fed and other decision-makers have focused on trade and other risks to ongoing economic growth, and this could be holding some sellers back.
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