Limited inventory continues to hamper the resale market, as the number of homes actively for sale shrunk for the fourth consecutive month in October. While inventory increased month over month from September to October, it was still down 2% on an annual basis.
While inventory remains constrained, home prices have remained relatively stable for prospective home buyers, according to Realtor.com’s October Monthly Housing Trends Report. The share of price reductions, while down on a year-over-year basis, continued to grow on a monthly basis, indicating home prices could soften in the coming months.
“The current housing market continues to challenge home buyers and sellers alike, but we do see signs of adjustment,” Danielle Hale, chief economist at Realtor.com, says. “While record-high mortgage rates are putting off many would-be buyers, decreases in both inventory and time homes spend on the market show that some buyers are moving quickly to lock in rates before they can go any higher.”
As a result of the lower inventory levels and elevated home prices, Realtor.com says many prospective home buyers are either turning to the new-home market or opting to remain renters due to its relative affordability. However, the organization noted several “unusual” data points emerged in October, including a late-season growth in the inventory of homes for sale as well as the rising share of price reductions.
Pending listings, the number of homes under contract but not yet sold, declined 7.6% in October compared with the same time last year. Realtor.com says pending homes are an early indicator of the direction of home sales, which cooled to a lower annual pace of 3.96 million in September.
On a regional basis, only the South experienced inventory growth on a year-over-year basis in October. Inventory declined 4.8% in the Midwest, 10.4% in the Northeast, and 24.7% in the West. Some southern metros, including Memphis, Tennessee (+30.3%), New Orleans (+26%), and San Antonio (+20.6%) experienced significant inventory growth on a year-over-year basis. Two metros, Austin, Texas (+10.4%) and San Antonio (+9.1%), saw higher levels of inventory in October than typical 2017 to 2019 levels.
In terms of price, Northeastern metros had the highest average growth rate in active listing prices on a year-over-year basis (+9.3%). Prices in Los Angeles (+23.3%), Richmond, Virginia (+14.5%), and Providence, Rhode Island (+13.7%) grew the most on an annual basis. Five of the 50 largest metros analyzed by Realtor.com experienced price declines on a year-over-year basis: San Antonio (-2.2%), San Jose, California (-1.3%), Memphis (-0.5%), Dallas (-0.2%), and Miami (-0.1%).
Realtor.com says the amount of time homes are spending on the market is rising more slowly than usual during the fall season, impacted by limited supply and strong buyer appetite. The typical home spent 50 days on the market in October, one day shorter than the same time last year and more than two weeks less than the average in October from 2017 to 2019. Time on the market increased in 16 of the 50 largest metros on a year-over-year basis.