Mark your calendars: The month of May might go down as a turning point in the red-hot real estate market that’s been scalding homebuyers for the past few years.
The number of new listings that hit the market last month rose for the first time since June 2019, according to a new report from Realtor.com®. As a result, May home shoppers had 8% more active listings to scroll through compared with this point last year.
“We’re seeing more homeowners decide to sell,” says Danielle Hale, chief economist of Realtor.com. “Buyers can expect more inventory going forward, more homes to choose from.”
Granted, there are still only half as many homes available for sale compared with pre-pandemic levels two years ago. Nonetheless, this recent uptick could offer a glimmer of hope for buyers who’ve been scrambling for homes amid bidding wars and way-over-asking offers.
“For context, even though we’re seeing inventory grow, it remains quite low,” says Hale. “This is one of the reasons that we are still seeing home prices go up and homes [spending] a record-low amount of time on the market for sale.”
How high are home prices now?
Despite growing inventory, many homebuyers might still feel squeezed in terms of their pocketbooks.
In May, the median asking price of a home soared to yet another new apex of $447,000. That’s a 17.6% increase over last year, and up 35.4% compared with May 2020.
Combined with rising mortgage rates (now over 5%), the cost of financing a home is up 50% over a year ago. As a result, some homebuyers have given up their house hunt until home prices and/or interest rates fall back within realistic reach—whenever that may be.
“Monthly [mortgage] payments are higher, and that’s knocked some buyers out of the market altogether, while others are proceeding with caution,” says Hale. “For buyers who are able to continue their home search despite higher costs, more inventory means more choices for them.”
And over time, this could trickle down to help the rest of the homebuyers, too.
“More inventory should eventually translate into a slower pace of sales and [slower] price gains,” says Hale. “With prices still growing at double digits, we’re a long way from price declines, but price growth is likely to slow.”
How fast are homes selling today?
Even though more homes are going up for sale, buyers aren’t wasting any time to make a deal.
Nationwide, the typical home spent just 31 days on the market in May. That’s almost a full week (6 days) faster than last year, and the shortest time on record since Realtor.com first began tracking this data in 2016.
Cities where home prices are falling
The 50 largest metropolitan areas saw a significant jump in median listing prices, with asking prices averaging 13% more than last year. (Metros include the main city and the surrounding suburbs, towns, and smaller urban areas.)
Yet at the same time, many sellers are finally feeling forced to slash their prices. Nationwide, homes with price reductions jumped to 10.5% in May, compared with 6.2% last year. Austin, TX, had the most price reductions of any city (+14.7%), followed by Las Vegas (12.3%) and Phoenix (11.6%).
This softening seen in these red-hot markets might mean that sellers’ expectations have not yet caught up with the realities of this rapidly shifting buyer-seller dynamic.
“Most housing markets remain in seller’s market territory,” says Hale. “But the market is a little more buyer-friendly than we saw last month, and we expect that to continue.”
The take-home lesson for home sellers?
“Sellers should make sure that they’re tapped into the latest local market data when making a decision about their asking price,” says Hale. “If a seller aims too high in this market, he may have to cut the price to attract offers.”