Real estate markets are settling in a more typical seasonal pattern as we progress through October. Lower temperatures are cooling the overheated pace of activity seen during the early months of 2021. While the number of for-sale properties remains below the number of homebuyers looking for their next home, the turnover in listings is slowing, as properties spend slightly longer on the market. In turn, price appreciation is solidly confined in a narrow band, rising at 8.6% this past week compared to last year’s double-digit pace.
However, in a clear sign of the challenges still, ahead, the number of homeowners choosing to sell their homes is lagging behind last year, a period when markets contended with tight inventory. The solution for this difficulty is simple—we need to build more homes—however, its execution is complicated by myriad market dynamics, from zoning restrictions to higher land prices, and from rising lumber and labor costs to supply chain bottlenecks. For buyers, the silver lining is that a slowdown in price growth coupled with properties spending more days on the market provides more options and better opportunities to find a home.
- The median listing price grew by 8.6% over last year. Annual home price growth has been moving in an 8% to 9% range for 11 of the past 12 weeks, stabilizing to a steady upward rate after historical highs earlier this year. Home prices continue to rise due to a mismatch between supply and demand, stemming from a decade-long shortage of homebuilding. While price gains have slowed, asking prices for typically sized single-family homes continue to increase at a double-digit pace, not far behind this summer’s record-high home sales price growth. This means that housing affordability will be an increasingly important consideration for buyers.
- New listings—a measure of sellers putting homes up for sale—were down 2% from last year. For the past five weeks, we saw softer participation from sellers, and this week’s housing inventory data continues the trend. New listings have declined in 7 of the last 8 weeks after a five-month period of steady gains. However, new listings have improved slightly for the second week in a row. This metric is closely watched given its importance in the homebuyers’ search process, along with its impact on prices and affordability.
- Active inventory continues to fall short and is down 22% from a year ago for the sixth straight week. With new listings still constrained, the closing in the inventory gap we saw over during the April – September period has stalled. With fewer homeowners choosing to list their homes for sale going into autumn, it’s harder to see active inventory grow while homebuyers are still snapping up homes.
- Time on the market was down 8 days from last year. Homes continue to move faster than one year ago, and in fact, the speed has quickened so much that every week since mid-March has had a lower time on the market than the fastest-selling week in 2020. Although 2020 was unusual because homes sold fastest in September and October 2021 is on track for a more normal pattern, with the lowest time on the market in summer. This June, the typical listing was on the market for a record fast of 37 days, and we saw that figure inch up by 1 day each month in both July and August. In September, time on the market was up another 4 days from August. This should mean that in the weeks ahead properties will spend more time on the market, giving homebuyers more time to make decisions.