Very, very, very slight signs are signaling potential change in the single-family housing market. Specifically, Realtor.com’s prediction is that May 2022 “might go down as a turning point in the red-hot real estate market that’s been scalding homebuyers for the past few years.” According to a new Realtor.com report, the number of new home listings coming to market in May increased for the first time since June 2019. Potential homebuyers had 8% more active listings to look at, versus the same period a year ago.
Before getting too excited, it’s important to know that the inventory of active listings was down 48.5% compared to May 2020 (meaning there are still only half as many homes available). This is leading to continued home price increases (up 17.5% year over year, at a median listing price of $447,000) and a still-small amount of time on the market between listing and final sale. Realtor.com reported that the typical home spent 31 days on the market on May, a week faster than last year, and the shortest time on record since Realtor.com began tracking the information in 2016.
Also increasing? Mortgage rates, which now top 5%. This means the cost of financing a home has increased by 50%. This is prompting some homebuyers to stay on the sidelines until either interest rates or home prices—or both—fall to more reasonable levels.
On the other side of the coin, “we’re seeing more homeowners decide to sell,” said Realtor.com Chief Economist Danielle Hale. “Buyers can expect more inventory going forward, more homes to choose from.” She added that additional inventory should eventually translate into a slower sales pace and fewer price gains. While home prices continue to accelerate by double digits, “price growth is likely to slow,” she commented.
This is taking place in some areas. While homes with price reductions jumped to 10.5% nationwide in May, such homes with price reductions increased by 14.7% in Austin, TX; 12.3% in Las Vegas and 11.5% in Phoenix.
Acknowledged Hale: “Most markets remain in seller’s market territory. But the market is a little more buyer-friendly than we saw last month, and we expect that to continue.”
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