Say goodbye to bidding wars: the number of homes on the market just spiked at a record pace
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- The US supply of active home listings surged 30.7% in the year through July, Realtor.com said.
- That marked the third straight month of record-breaking inventory growth.
- Housing market activity has quickly cooled as soaring mortgage rates crush buyer demand.
In just one year, the story of the US housing market has completely flipped.
It's now housing supply — not demand — that's surging at a record pace. The national inventory of available homes rose by 30.7% in the year through July, according to a Realtor.com report published Tuesday. That's the fastest pace since at least 2017 and the third consecutive month of record-breaking inventory growth.
The uptick amounted to 176,000 more homes actively for sale on an average July day than in the year-ago period, Sabrina Speianu, economic data manager at Realtor.com, said in the report.
The total supply of unsold homes rose by 3.5%, reflecting the first increase since September 2019. That measure's increase was smaller largely due to the fact that it counts homes in various stages of the selling process that aren't yet sold. The gauge showed annual declines throughout much of the pandemic as most homes spent only a few days on the market.
The rebound in home supply is a welcome development for Americans looking to buy their first house. That's because the US has been in a housing shortage for years — and the COVID-19 pandemic has only exacerbated the problem.
Many construction projects have stalled during the pandemic due to labor shortages and a lack of building material. This has made homebuilding costly and difficult, leading to less new residential construction. But as priced-out homebuyers sit on the sidelines, the surge in demand has faded and given way to more existing home inventory.
Soaring mortgage rates have also played a major role in slowing homebuyer demand and the housing market's price surge. The Federal Reserve has been raising interest rates at the fastest pace since the 1980s as it aims to cool sky-high inflation. The hikes lifted borrowing costs throughout the economy, including the housing sector.
The average rate on a 30-year fixed-rate mortgage now sits at 4.99%. While that's down slightly from the late-June high of 5.81%, it's still nearly two percentage points higher than levels seen at the end of 2021.
The steady increase quickly stifled the housing demand that drove prices sharply higher throughout the pandemic. After several months of frenetic bidding wars that pushed selling prices higher, sales of both new and existing homes are down significantly.
Home price growth has started to slow too, albeit not by much. The S&P Case-Shiller National Home Price Index dipped to a 19.7% year-over-year pace in May, down from 20.6% the month prior. While that's still well above the pre-pandemic pace of roughly 4%, the recent influx of supply and slower sales rates signal home inflation could be turning a corner.
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