The long-awaited housing market recovery that was all but promised this year has yet to materialize. But there might be a glimmer of hope: Inventory is soaring.
Exclusive data from Homes.com revealed that May had the largest number of homes for sale since October 2019. Compared to a year earlier, inventory increased 17.2%, climbing to 1.02 million houses.
It’s the fifth consecutive month of inventory growth, the data found.
The rise in supply was driven by a 15.1% uptick in single-family homes, a 21.9% increase in townhouses and a 31.8% jump in condos.
It’s a shift that’s taken hold as economic dynamics have shifted — and it could change the makeup of the housing market, giving buyers more power, according to Erika Ludvigsen, national director of residential analytics at Homes.com.
"The inventory of listings is rising due to an easing of the mortgage rate ‘lock-in’ effect, slower buyer demand and economic uncertainty,” Ludvigsen said. “As more sellers enter the market, buyers gain options and negotiating power, suggesting a slight shift away from a seller's market and towards a buyer's market at the national level."
In other words, sellers who secured a low mortgage rate between 2020 and 2022 are becoming more comfortable giving up their rate or have life circumstances requiring them to move. At the same time, economic conditions have made buyers wary, slowing demand.
Taken together, those changes are starting to reset the balance of the housing market.
Supply is growing the most in the Sun Belt and the West
Of the 10 markets that saw the greatest increase in housing inventory in May, four were in the Sun Belt and four were in the West.
The uneven distribution is attributable to differences in population growth, pricing and building, according to Ludvigsen.
“Pandemic-driven migration to these areas has slowed, while buyer demand has weakened due to high interest rates," she said. "High-priced California markets are facing an affordability crisis, causing homes to remain on the market longer. Rapid homebuilding during and post-pandemic, especially in Sun Belt markets and Colorado, has added significant new housing stock in recent years.”
Atlanta led the country's top 40 metropolitan areas with a more than 41% increase in for-sale homes. Miami; Washington, D.C.; Raleigh, North Carolina; Jacksonville, Florida; Los Angeles; San Diego; and Denver all saw inventory increases of 30% or more.
On the other hand, the Midwest had four of the 10 markets with the lowest rate of growth in the 12 months ended in May.