The red-hot housing market is showing signs of cooling.
For the first time since June 2019, the country’s supply of homes for sale grew compared with the prior year, according to Realtor.com’s May housing report, released Thursday. And more sellers newly listed their homes for sale in May than in any other month since June 2019.
Those are welcomed signs for buyers, who have been struggling over the last two years in a market where sellers have dominated, home prices have shot up, and more recently, mortgage interest rates have risen above 5%. Housing supply hit record lows during the pandemic as buyer demand skyrocketed, some sellers hesitated to list their homes for sale, and home construction trailed needs after years of underbuilding.
Still, only half as many homes are available for sale now than were available two years ago.
Nationwide, active housing inventory grew 8% in May from May 2021, according to Realtor.com. That’s 38,000 more homes active on the market on a typical day in May than last year. In the Philadelphia metropolitan area, which includes Camden and Wilmington, active home listings grew about 4%. New listings grew nearly 5% in the same period, on par with the average across large metro areas. Across the country, new listings grew about 6%.
The “inventory comeback” is being fueled both by new sellers and slowing demand, said Danielle Hale, chief economist for Realtor.com.
Higher housing costs are moderating buyer demand as more aspiring homeowners get priced out of the market. Meanwhile, more sellers may feel more confident about listing their homes as the pandemic has become less of a threat, and buying a replacement home has gotten easier.
“While this real estate refresh is welcome news in a still-undersupplied market,” Hale said in a statement, “it has yet to make a dent in home price growth, partially due to increases in newly listed, larger homes and because the typical seller outlook is quite high, likely shaped by recent experiences of homeowners who sold.”
The region’s median asking price — $340,000 — stayed the same this May compared with last May. That’s an indication of the area’s relative affordability compared with other areas of the country. On average, median listing prices in large metro areas grew 13% compared with last year. Nationwide, the median asking price for active listings grew more than 17% to $447,000.
As the housing market starts to shift and buyers regain some power, Redfin is advising sellers to list their homes for sale sooner rather than later and to price their homes for less than they would have earlier this year.
“During the pandemic-fueled housing frenzy, sellers could count on getting more money for their home than a neighbor who sold last month,” Daryl Fairweather, Redfin’s chief economist, said in a statement. “Those days are over. Now, you should expect to get a bit less than what your neighbor got a month ago — and in a month, you may get less than you would get now.”
Nearly one in five sellers nationwide lowered the asking price last month, as the market shifts and buyers adjust what they are willing to pay, according to Redfin. That’s mostly because higher mortgage rates are pushing monthly mortgage payments up near record highs, she said. Buyers are sensitive to those increases.
Fairweather said she doesn’t expect prices to fall lower than they were last year, but price growth will likely slow in the coming months.
The appearance of homes for sale matters more now than a year ago, and sellers should be open to negotiations with buyers who now have more power to ask for repairs or money, according to a report with home-selling tips that Redfin released Thursday.