According to the Realtor.com® July 2022 Monthly Housing Trends Report, home shoppers across the U.S. had 30.7% more actively-listed homes to choose from than in July 2021.
The record annual pace (+30.7%) is faster than any rate in Realtor.com’s data history and builds on the growth rates for June (18.7%) and May (8%).
So, what’s behind three straight months of record-breaking inventory increases? And how can you use this data to help your clients?
Softening buyer demand is the biggest driver
Higher mortgage rates hiked monthly payments up to 1.5 times higher than in July 2021. This has caused many buyers to hold off, giving the number of active listings room to grow.
Buyer competition is still fierce—which works in sellers’ favor—but the higher cost of housing has tempered it over the past few months.
With fewer buyers shopping for homes, even with the 2.8% drop in new listings for July (compared to July 2021), the number of active listings has increased. And that means buyers still in search of a home have more options.
Buyers are prioritizing affordability
The U.S. housing market is trending toward a more balanced profile of supply and demand compared to the 2021 buying frenzy. Buyers contending with those higher mortgage rates have had to adjust their expectations concerning housing prices they can reasonably afford.
Sellers have had to make the same adjustment in response to the drop in offers and smaller margin over asking by lowering their asking price.
That said, demand from out-of-state buyers—especially in areas with more affordable housing—has increased.
Our analysis highlights how home shoppers are prioritizing affordability in the face of financial challenges, but also the variety of reasons that Americans are taking advantage of opportunities to relocate. People are eager to move to new areas offering relatively lower living expenses in the face of high inflation, more outdoor recreation, jobs in different cities, working for their old office from home in a new locale, and more. As a result, we’ve seen Cross-Market Demand increase in every quarter since 2020 at the peak of pandemic lockdowns, a marked shift and one to keep an eye on as Americans progress further into the new normal.
Inventory growth in biggest U.S. metros
Active inventory grew even faster (+41.0% on average) in the 50 largest U.S. metros, with 45 markets posting gains. Phoenix led with +158.7%, followed by Austin, TX (%154.5%) and Raleigh, NC (+137.5%).
In 13 of the biggest metros, more new sellers entered the market in July 2022 than in July 2021, with Las Vegas, NV (+37.6%), Nashville, TN (+37.1%), and Oklahoma City, OK (+28.6%) seeing the most significant increases in new listings.
Demand from out-of-state buyers—or buyers from other in-state areas—-is a significant factor in this growth. From April to June 2022, over half (53%) of listings views on Realtor.com® were from buyers outside the listing’s metro area, up from 48% in the first quarter and a new all-time high.
It’s still a seller’s market
While for-sale home options have increased for buyers, competition is still strong enough, especially in areas with higher demand from out-of-state buyers, to give sellers an edge.
Listing prices are near all-time highs, and homes are selling more quickly than before COVID. Whether or not sellers take advantage of these conditions will be key to housing market trends—including inventory—for the remainder of 2022.
The decline in new listings suggests some prospective sellers are holding off, waiting to see how recent shifts in the market will affect their prospects. Homeowners who’ve witnessed or read about sellers having to lower their asking price may be waiting in hopes that the market will swing more decisively in their favor.
Top takeaways for real estate agents
Sellers are in an excellent position to take advantage by listing their homes. But not all of them are aware of this.
Knowing your market means being able to advise sellers on the best asking price for their homes. With demand still strong, well-priced homes are selling quickly. You can also help sellers make good use of the equity cushion they’ve built over years of rising home prices.
As for potential buyers, you’re in a better position to help them understand how the market affects their buying power, so they can save time by targeting homes they can afford and confidently navigate the buying process.
