Home Prices Stable Amid Inventory Drought and Rising Rates - Los Angeles Times
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Home Prices Stable Amid Inventory Drought and Rising Rates

Real estate or property
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In October, the number of homes actively for sale shrank on an annual basis for the fourth month in a row, despite an unseasonal increase in inventory over September

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While home prices remained relatively stable year over year this October, limited inventory continues to hamper homebuyers as the number of homes actively for sale shrank on an annual basis (-2.0%) for the fourth month in a row, according to the Realtor.com October Monthly Housing Trends Report. However, inventory rose unseasonably (+5.1%) between September and October this year as mortgage rates exceeded 20-year highs and created additional headwinds for homebuyers.

Notably, while home prices stayed flat, the share of price reductions, while down year over year, continued to grow on a monthly basis, indicating that home prices could potentially soften in the coming months.

“The current housing market continues to challenge homebuyers and sellers alike, but we do see signs of adjustment,” said Danielle Hale, chief economist at realtor.com. “While record-high mortgage rates are putting off many would-be buyers, decreases in both inventory and time homes spend on the market shows that some buyers are moving quickly to lock in rates before they can go any higher. Buyers did see some measure of relief in stable home prices this month, and we’ll be watching the rising share of listings with reduced prices to see how that impacts prices in the near future.”

What it means for homebuyers, sellers, and the housing market
Inventory down -41.8% below typical 2017 to 2019 pre-pandemic levels, still-climbing mortgage rates, and elevated home prices continue to deter potential buyers in October. To help offset scarce inventory and affordability challenges, many homebuyers are turning to affordable new construction, while those who choose to remain renters for longer are quickly absorbing more affordable new units coming onto the market.

A few relatively unusual monthly data points are worth watching, such as late-season growth in the inventory of homes for sale at a time when it would typically decline, along with the rising share of price reductions, which could signal a softness in prices in the coming months. Easing prices would be encouraging news for buyers, as much-higher mortgage rates compared to last October have increased the monthly cost of financing 80% of the typical home by roughly $166 (+7.4%) compared to one year ago, bringing it to a high not previously seen in Realtor.com® data that stretches back to mid-2016. In practical terms, this means households looking to purchase the median-priced home in October now need an additional $6,600 in annual income ($120,000) compared to the same time last year.

“Because high mortgage rates, elevated home prices, and stubbornly low inventory make today’s housing market particularly challenging, many of today’s buyers are motivated by life changes, such as growing families, supporting elderly parents or grown children, or accommodating professional needs, from return to office mandates to relocation opportunities created by remote work,” said Realtor.com’s executive news editor Clare Trapasso. “On a positive note, our data shows that home shoppers with flexibility in their location choices can still find affordable options this fall.”

The number of homes for sale dropped year over year in October for the fourth straight month. However, October saw an unseasonal bump in inventory compared with September. Despite this small increase, active inventory still remained well below typical 2017 to 2019 levels and is down year over year across the majority of the largest metros, although a few Southern metros saw significant gains. New listings are also down as home sellers were less active in October, although the gap compared to last year is narrowing. Pending listings, an early indicator of where home sales are headed, are also down year over year.

In the largest metros, the combined annual median list price growth rate for active listings was +5.5%, outpacing the national growth rate. While all regions saw listing prices in larger metros still increasing on average, Northeastern metros had the highest average growth rate in active listing prices (+9.3% year over year). Prices in Los Angeles (+23.3%), Richmond, Va. (+14.5%), and Providence, RI (+13.7%), saw the biggest increases.

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