Signs Point to More Inventory this Spring

The real estate housing market has been gradually building for a couple of months as home sellers start to ease back into the market.

New listings are exceeding the levels of a year ago; as a result, we’re starting to see slightly more available supply of homes on the market. This is an expansion of the market from incredibly restricted levels last year, which is a positive development.

The longer mortgage rates stay high, the more inventory will build closer to where it used to be. Mortgage rates are higher than they were a year ago. Higher than they were a month ago. Higher mortgage rates mean more inventory.

If mortgage rates fall into the 5s this spring, you should expect the available inventory to decline as demand picks up rapidly. But as of now, rates are holding in the upper 6s and inventory is building slowly.

It’s important to remember that the housing market is experiencing an increase in sales due to rising inventory. As more homes become available on the market, one of the factors that contributed to low home sales last year is being alleviated. Both the number of homes for sale and the number of homes being sold are on the rise this year, compared to the previous year.

Inventory Ticked Up
These are the signals that point to a growing inventory of homes on the market all spring. Even if inventory ticks down, it looks like that will be a smaller move than last year, so the year-over-year percentage gain will continue to widen.

Slightly More Sellers
Inventory is building now because we have slightly more sellers each week. The market had about 49,000 new listings this week. 9,000 of those are already in contract. Leaving 40,000 New listings to add to the market which is about a 5% increase versus last year.

It sure looks now like we’ll have more sellers each week all year long than we did in 2023.

The other side of the equation to keep watch is the purchase side. I’ve called this a supply-constrained market. So as the inventory shortage eases just a bit, we should also see more transactions happening. And sure enough, that’s what we’re seeing. There continues to be more new contracts each week than last year at this same time. The pace of home sales is growing. It’s not a boom. but the market is growing.

Price Cuts Stable
In 2023, even though we had very few home sales, home prices inched up a bit nationwide. We’re looking at similar dynamics for 2024.

Price reductions continue to decline with the new inventory after the first of the year. Some 32.2% of the homes on the market have had a price reduction. That’s right in the middle of the normal range. This implies slight home price strength in general for the next few months. If rates fall from here into the 5s, watch demand pick up and we’ll immediately see fewer sellers need to cut their prices.

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