The sharp increase in home prices over the past few years has had a pretty simple explanation: Too much demand, not enough supply. But that may be changing.
According to new data from Realtor.com, there were 30% more homes for sale in July of this year than there were the same time last year.
That is the highest year-over-year increase in inventory since the real estate listing and information site started tracking the number in 2017.
There haven’t been nearly enough homes for sale to meet demand for years now. Ali Wolf, at the housing data and consultancy firm Zonda, said that was true even before the pandemic.
“And when the pandemic hit, and there was this extra level of demand, we saw inventory levels hit new lows,” Wolf said.
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Now, she said, that is finally starting to change.
“For the past couple of months now, we’ve seen inventory on both the new and on the resale side rise,” Wolf said.
To be clear, there still aren’t that many homes for sale. Just more than there were a year ago.
Danielle Hale at Realtor.com said the main reason for the rise in inventory is that mortgage rates are up and home prices are still near record highs.
“That combination means that today’s home shoppers are looking at a monthly mortgage payment that’s up about 50% compared to a year ago,” Hale said.
So fewer people are actively looking to buy right now. And those who are are being pickier, said Daryl Fairweather at real estate brokerage website Redfin.
“What’s happening is that the homes that are being listed aren’t attracting offers right away,” Fairweather said. “So they’re sitting and piling up on the market, and that’s adding to more inventory.”
Redfin’s data shows the percentage of homes sitting on the market for more than 30 days rose in July.
And more sellers have been cutting their prices too.
“I’ve been telling sellers to price modestly so that your home sells quickly and you don’t end up with a home sitting on the market,” Fairweather said.
But, she said, not everyone is ready to do that.
“They may have seen that their neighbor’s home sold for a certain amount and anything less than that price would be a loss in their mind,” he said. “And it’s hard to get people past that mindset.”
But for sellers, she said it’s worth remembering that even though the market may be cooling a bit, home prices are still much higher than they were a year ago. So they’re still going to make a lot of money.