Economists say the historic shortage of homes for sale is coming to an end, as more inventory is added to the market.
Realtor.com reported that active listings of existing homes rose 19$ in June, the fastest rise since it began tracking the data five years ago. Meanwhile, the number of new listings also surpassed pre-pandemic levels, rising 4.5% from a year ago.
For now though, inventory remains critically low at around 50% of pre-COVID levels.
The new listings are pouring onto some of the markets that saw the biggest jumps in home demand during the height of the pandemic. For instance, Austin has seen its inventory level jump by 145% from a year ago, while Phoenix is up 113% and Raleigh is up 112%. However, some markets are still faced with lower inventory, such as Chicago, where home listings are down 13%, and Miami, where inventory is 16% below last year’s level.
That said, there is definitely relief on the horizon, with realtor.com’s chief economics Danielle Hale saying that inventory growth has accelerated throughout June and that it should continue into next month.
On the other hand, the expanded supply of homes for sale is not doing much to reduce the sky high prices of homes. In June, the median home listing price hit another record high at $450,000, realtor.com’s data shows. While home price gains are moderating, they are still up 17% from a year ago.
There are a few factors that could prohibit further inventory growth, such as a pullback from potential sellers. But Hale thinks that’s unlikely. “As expectations of higher future mortgage rates rise, today’s home shoppers could be more motivated, especially now that they’re seeing more options to choose from,” she said.
In other news, home affordability continues to suffer. A report this week from ATTOM Data Solutions showed that the cost of owning a median-priced home in the second quarter was 31.5% of the average U.S. wage. That’s the highest percentage since 2007 and up from 24% one year ago. Given that lenders generally set a debt to income ratio of 28% as the ceiling for mortgage approvals, that explains why many people are now struggling to qualify for loans.
ATTOM said the result is that home affordability fell across 97% of the markets it tracks.