According to Realtor.com's July Monthly Housing Trends Report, the U.S. housing inventory crunch accelerated in July as active listings growth slowed for the fourth month in a row and fell below year ago levels (-6.4%) for the first time since April 2022.
While buyers had fewer for-sale options, with active inventory 49.2% below typical pre-pandemic July levels, the market tipped slightly in their favor as the median list price declined year over year (-0.9% to $440,000) for the second month in a row.
"While a second monthly year-over-year decline in list prices bodes well for potential buyers, the ongoing lack of homes available for sale continues to prop up home prices and will keep declines relatively modest for the remainder of the year," said Danielle Hale, Chief Economist for Realtor.com. "Interest rate hikes continue to further cut into buyers' purchasing power, although they appear to have adapted to the higher mortgage rate environment faster than sellers, many of whom are still on the sidelines, locked in to lower interest rates and unwilling to cash in their home's equity to purchase another. That's putting a damper on home sales, which will likely post their smallest annual tally this year in over a decade."
July 2023 Housing Metrics - National
Home listing inventory crunch intensifies as fewer sellers enter the market
Growth in the U.S. inventory of active listings slowed for four months in a row, and in July, declined compared to the previous year for the first time since early 2022. That means today's buyers have significantly fewer options to choose from compared to one year ago - on a typical day in July there were 45,000 fewer homes available to buy. With interest rates on track to remain elevated for the remainder of the year and homeowners choosing to sell in lower numbers than has been typical in recent years, the stock of homes for sale is expected to remain low in the coming months.
Home listing prices decline but mortgage rates keep purchase costs high
In July, national median list prices declined slightly year over year for the second month in a row. Despite the dip, the low supply of homes for sale and a resilient labor market are expected to keep upward pressure on prices this year, as will still-high buyer demand. The housing market continues to generally move faster than it did in the pre-pandemic era despite significant slowing from the frenzied pace of the past few years; while time on market is up slightly from last year, the share of homes with price reductions is down from last July.
Spotlight On: A rising number of buyers are looking for homes in other markets
With rising rates and still-high home prices, the number of home shoppers searching for homes in areas other than where they live continues to rise. Realtor.com's Q2 Cross-Market Demand Report, also released today, found that Western shoppers are most likely to look for out-of-market homes, but Northeastern shoppers are catching up - that region saw the highest growth this quarter. While home shoppers show the greatest preference for searching for homes in nearby metros or states, long-distance home searching sometimes pairs unexpected cities, such as from San Francisco to Chicago and Chicago to Dallas.
"Housing affordability isn't likely to improve anytime soon, so it's not surprising to see that Americans are on the move and increasingly searching for homes in more affordable areas of the country where they can stretch their housing dollars further," said Jiayi Xu, Realtor.com Economist. "Sellers are much more likely to see interest from out-of-towners than in years past, and from where that interest is coming might be the most surprising."