As the housing market rolls to the end of the summer season, the number of active home sellers continues to swell, and could eventually turn the home buying tide.
In June, the number of for-sale listings rose by 18.7%, the second straight month of growth, and the fastest pace since July 2017. After two-plus years of abnormal seasonality, seller confidence is growing, despite the record-high asking prices.
This could mean more choices for home shoppers looking to get re-settled before the new school year begins.
Granted, there is a long way to go before housing inventory levels get back to where they were before COVID-19. In June 2019, there were 53.2% more homes on the market. Even as markets adjust rapidly, the number of homes for sale remains limited. Home prices are still going up.
The 50 largest metropolitan areas have seen significant jumps in 2022, with asking prices rising an average of 13%.
Behind the rising prices looms the Federal Reserve . The U.S. central bank raised key interest rates by another 0.75% in July, to a range of 2.25 to 2.5%. More hikes are expected this year and next. While the Fed's baseline rates represent what banks charge to loan to each other, they typically trickle down to other loans, including credit cards, auto loans and mortgages.
Mortgage rates have risen rapidly this year, sitting at more than 2 percentage points higher than last year at this time. As a result, homebuyers are paying more each month to buy the same home. With consumer inflation at a four-decade high, housing activity has already slowed sharply.
But, if current for-sale trends continue, it could tip market conditions in a buyer-friendly direction. Already, more sellers are lowering prices. Nationwide, homes with price reductions jumped to 10.5% in May, compared with 6.2% last year. The summer of 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.
For buyers who can absorb the higher costs, more inventory means more choices. Over time, this could help the rest of the homebuyers, too.
Another bright spot for buyers? They gain a little power during final sales negotiations. Sellers in the market today will likely find buyers growing more selective.
But home prices have increased much faster than wages since 2020, meaning affordability is unlikely to improve for first-time homebuyers any time soon.
There could be a glimmer of hope. Analysts believe the burning U.S. house price inflation will cool to 10% by the end of 2022. With enough new listings and new housing starts, those buyers’ incomes may “catch up” as prices level off over the next few years.