America’s housing market has undergone some wild swings during the coronavirus pandemic, but at long last, it appears to be recovering.
(Realtor.com / Getty Images)
By Margaret Heidenry
In June, the number of real estate listings rose by 18.7% compared with a year earlier, according to a new report by Realtor.com®. That’s the second straight month of growth, and the fastest rise on record since July 2017, when this data was first collected. All told, this amounts to 98,000 more homes for sale every day compared with the same time last year.
Granted, this record-setting growth has a long way to go before boosting the nation’s housing inventory levels back to where they were before COVID-19. Three years ago, in June 2019, there were 53.2% more homes on the market—more than double what’s available today.
Nonetheless, the latest numbers suggest that America’s housing shortage woes might be seeing a glimmer of light at the end of the tunnel.
High home prices set yet another record
This gush of new sellers is likely motivated by the desire to cash in, as their profits continue to skyrocket. In June, median home prices hit another record high of $450,000—up 16.9% compared with last year and a whopping 31.4% compared with June 2020.
Meanwhile, weary buyers face not only sky-high home prices but also rising mortgage rates that now hover at 5.8%. And that financial double whammy is hitting homebuyers hard: Compared with just a year ago, the cost of financing 80% of a typical home rose 57.6%, amounting to an extra $745 per month.
Yet there is some relief in sight for home shoppers: The flood of new homes on the market likely means they’ll have more leverage when it comes to negotiating down the asking price. This, in turn, could help temper the raging seller's market of the past two years and begin to balance the highly lopsided negotiating dynamics.
“The increase in the number of homes for sale in June is due to a couple of key factors: Namely, sellers are putting more homes up for sale than last year. In fact, we’re back to about as many sellers as we saw in a typical pre-pandemic market,” explains Realtor.com Chief Economist Danielle Hale.
“At the same time, buyers have grown pickier as home prices and, more importantly, their monthly payment costs skyrocketed as mortgage rates surge,” says Hale. “We’re getting more supply of homes for sale just as demand is reaching a breaking point for many buyers, and this has led to a rapid rebalancing or reset of the housing market.”
One city that illustrates the changes afoot is Austin, TX, which was one of the hottest markets during the height of the early pandemic real estate frenzy. In June, Austin’s active listings shot up 144.5% compared with last year.
“Prices are definitely starting to go down again, and the competition is slowing,” says Ryan Rodenbeck, owner and broker at Spyglass Realty in Austin. “Last Friday, an Austin home was listed at $825,000. The next day, at the open house, no one came. A few months ago, there would have been 20 or more buyers showing up. The sellers didn’t want to test the market, so on Sunday, they dropped it to $790,000. It sold for $760,000.”
Other hot spots, including Raleigh, NC, and Phoenix, also saw their inventory levels increase by more than 100% year over year.
“These markets are undergoing rapid adjustments and are great examples of the nationwide trend we’re seeing,” says Hale. “Sellers in these areas are jumping into the market while buyers are growing more selective.”
How quickly are homes selling today?
Despite skyrocketing listings, home prices, and mortgage rates, many buyers continue to waste no time making an offer. In June 2019, listings remained active for 59 days on average. Today, that window has shrunk to a mere 32 days. This time crunch is tied with last month’s record low, the shortest time on record since 2016.
Desperate home shoppers likely still jump at the chance to land a home because they see the writing on the wall: Interest rates are likely to continue to climb.
“Surveys showed that shoppers generally expected higher mortgage rates throughout the course of the year,” says Hale. “Concern that mortgage rates could continue to trend even higher is going to keep home shoppers motivated through summer and likely all throughout 2022.”
Margaret Heidenry is a writer living in Brooklyn, NY. Her work has appeared in the New York Times Magazine, Vanity Fair, and Boston Magazine.