Inventory is up, but the pace of sales remains slow
The latest monthly report from Realtor.com offers a familiar refrain: The market is sluggish, due in large part to affordability.
- Buyers were able to get some bargaining power but are still balking at higher prices and financing costs.
- This allowed inventory to rise as more homes sat on the market.
- Average listing prices appear to have settled at the $400,000 level.
While buyers started getting a little more bargaining power in January, the real estate market hasn't yet stabilized after a turbulent year.
In its monthly report, Realtor.com found that inventory continued to grow, but buyers were still struggling with affordability even as mortgage interest rates fell.
"Home buying in January remained relatively sluggish as sales slowed, inventories rose, and price growth leveled off. These trends reinforce that while buyers are gaining an advantage in the market, they are still being deterred by high home prices and financing costs," said Danielle Hale, Realtor.com's chief economist.
Active listings are up 65.5% in January versus a year earlier, but still down around 44% when compared to the pre-pandemic days of January 2019. New listings are also down 5.4% year-over-year, a sign that the rise in inventory is coming from homes staying on the market longer.
The average number of days on the market was 75 last month, 13 days longer than a year ago. That's still 12 fewer days than in January 2019, when the average was 87 days.
Prices have stabilized but are still higher than last year, according to the report. In January, the median list price was $400,000, up 8.1% year-over-year but unchanged compared to December.
The share of homes with price reductions rose to 15.3%, which is about 9 percentage points higher than a year ago.
Helping matters for buyers is the steady decline in mortgage interest rates, which have fallen from around 7% in October to slightly above 6% in January.
"For today's buyer of a median-priced home, the down payment amount is lower than it would have been last summer. While that is positive news, affordability remains a primary challenge, especially for first-time buyers," said George Ratiu, Realtor.com's senior economist and manager of economic research.
In search of affordable housing, visitors to Realtor.com's website are somewhat more likely to expand their home search than they were a year ago. During the fourth quarter of 2022, 55.5% of viewers searched outside their metro areas for homes, up from 53.4% a year earlier.
Markets in the Midwest and Northeast that offer shoppers relative deals were the most popular among out-of-market shoppers last quarter, according to the report. Popular metro areas include Pittsburgh, Cleveland, and the New York cities of Buffalo, Syracuse and Albany. Cities that saw the biggest drop in out-of-market home shoppers were Austin, Seattle, Knoxville, Albuquerque, and Ogden, Utah.
High costs likely made Phoenix and Los Angeles less desirable destinations for both local and out-of-metro home shoppers last quarter compared to the prior year. That matches up with Realtor.com's 2023 Housing Forecast, which predicted large year-over-years sales declines in those two metros.
Nearly all of the 50 largest metros added inventory in January, according to the report. Nashville had the biggest jump with a 303.5% increase, followed by Austin (up 260.4%) and Raleigh (up 254.8%). The only metro that didn't add inventory was Hartford, Connecticut, which had an 8% drop.