A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022.
Frederic J Brown | AFP | Getty Images
After more than two years of a historically lean housing market, prices are starting to rise — fast.
According to Realtor.com, active inventory rose 33.5% nationwide in October compared to the same time last year. This means that the offer is at its highest level in two years.
It’s not like sellers are rushing into the market; new homes listed are down 16% year over year and pending listings are down 30%. But supply is growing because the homes that are on the market aren’t selling as fast as they were six months ago.
The average number of days it takes to sell a home is now 51, up six days from a year ago.
“As the rapid rise in interest rates changes the dynamics of the housing market this fall, both buyers and sellers are taking a step back to recalibrate their plans,” said Danielle Hale, chief economist at Realtor.com.
Mortgage rates have been climbing so high and so fast that homebuyers are rushing to the sidelines. Affordability has already been difficult as property prices have risen by more than 40% since the start of the Covid-19 pandemic. But with interest rates now more than double where they were in January, at just over 7%, prospective buyers are expecting a monthly payment that’s nearly $1,000 higher than when the year started.
Housing availability varies by city based on demand and affordability.
In Phoenix, inventories rose an impressive 174% in October. The city has seen an insane rush of buyers over the past two years as employees suddenly able to work from anywhere relocated from expensive California markets. Sales in the city are down more than 30% from a year ago, according to Redfin.
Inventories are also up 167% in Raleigh, North Carolina, and 145% in Nashville, Tennessee, markets that have also seen an influx of buyers during the pandemic. Chicago, Milwaukee and Hartford, Connecticut, still have low inventories, but these markets haven’t seen the same spike in demand over the past two years.
The slowdown in demand for homes has prompted sellers to lower their prices. A whopping 20% of listings on Realtor.com have now been priced down – about twice as many as a year ago.
Still, home prices aren’t exactly falling just yet. However, according to several surveys, the price gains from a year ago are shrinking faster than ever before.
And with prices still high, more buyers seem to be widening their search. A little over 60% of ad views on Realtor.com in the third quarter of this year came from buyers outside of the realm of an ad. That’s up from 57% in the second quarter and 52% in the same quarter of 2021.
“For buyers with the flexibility, moving to a cheaper market could help offset higher mortgage costs. There’s also a takeaway for sellers in these areas – with a budget house you could still get a strong interest from these out-of-towners,” Hale added.