Inventory hits a two-year high — but that doesn’t mean buyers are biting
The inventory numbers should be good news for buyers, but affordability, combined with seller hesitancy, means the market is not yet buyer-friendly.
Key points:
- While there are more homes to choose from, the combination of higher interest rates and high asking prices is hampering affordability.
- Competing forces are keeping the market relatively balanced in many areas.
- A record number of potential buyers, particularly those in pricier regions, are looking at homes in other metro areas.
The slowdown in the real estate market is helping housing inventory bounce back, but it's not yet not benefiting many buyers.
The number of homes for sale jumped 33.5% year-over-year in October, the highest inventory level since 2020, according to the latest housing report from Realtor.com.
While buyers have more houses to choose from, prices remain high in many markets. Combined with a big jump in interest rates, the market remains unaffordable to many potential buyers because a typical monthly mortgage payment can be roughly $1,000 higher than a year ago. That's causing buyers and sellers to recalibrate their plans, said Danielle Hale, chief economist for Realtor.com.
"Buyers are weighing their options carefully, and that's led to homes spending more time on market. The slower sales activity has also increased the number of listings for sale, even though the number of homeowners deciding to sell trails year-ago levels," Hale said in an email.
Last month, the median days on market was 51 — an increase of six days year-over-year — but compared to the pre-pandemic market of Oct. 2019, homes are still selling 18 days sooner.
Hale said the increase in days on market suggests a shift in favor of buyers, but it's not yet buyer-friendly. "Buyers have advantages that they haven't seen in the last couple of years, but prices remain high, even on price-reduced homes," she said.
Hale noted that opposing forces are at work when it comes to housing inventory: On one side, buyers are delaying purchases, which increases inventory. On the other side, potential sellers are hesitant to list due to the slowing market and falling prices, which decreases inventory.
"So far, this has helped keep the housing market relatively balanced in most areas, despite the slower pace of sales," Hale said.
Among the 50 largest U.S. metros, 42 markets posted yearly active inventory gains in October. The biggest year-over-year gainers were Phoenix (+173.9%), Raleigh (+167.4%) and Nashville (+145%). Among the eight markets with lower year-over-year inventory levels, the largest drops were in Hartford, Conn. (-25.7%), Virginia Beach (-11.0%), Milwaukee (-9.6%) and Chicago (-9.6%).
Out-of-town shopping hits record levels
With affordability an issue, a record number of buyers are looking beyond their local metro, according to the report.
In the third quarter of 2022, 60.7% of listing views on Realtor.com came from users outside the listing's metro area, up from 52.1% a year ago. Home shoppers in the Northeast (69%) and West (65.7%) were more likely to search out-of-market areas compared to shoppers in other regions.
"The Northeast and West are each home to some of the most expensive metro areas of the country and have historically seen more out-of-metro shopping among residents than the Midwest or South," Hale said. "Still, with home prices and mortgage rates high, this type of shopping has reached record-level, likely a reflection of consumers seeking a workaround to local housing markets that have become unaffordable."