Despite stable home prices this October, the housing market is exhibiting signs of potential shifts as a new Realtor.com report highlights unseasonable inventory growth and mounting price reductions. These trends come as mortgage rates surpass a 20-year peak, challenging prospective homebuyers.
For the fourth consecutive month, there's been a decline in the number of homes actively listed for sale, with inventory dropping 2% year over year. Nonetheless, October brought an unexpected inventory rise of 5.1%, compared to September, marking an unusual trend during this season.
"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," Danielle Hale, chief economist at Realtor.com, said. "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."
Amid stable listing prices, a gradually increasing share of homes is witnessing price cuts. Although this percentage is down annually, the sequential growth might be an indicator of potential softening in home prices in the upcoming months.
"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," Realtor.com Executive News Editor Clare Trapasso said. "On a positive note, our data shows that home shoppers with flexibility in their location choices can still find affordable options this fall."
Another factor posing headwinds for potential buyers is the significantly higher mortgage rates compared to last October. This has escalated the monthly financing cost for 80% of a typical home by about $166, an increase of 7.4% compared to the previous year. In real terms, to purchase a median-priced home this October, households require an extra $6,600 in annual income, bringing the total to $120,000.
Regionally, the South was the only area to experience inventory growth in October with a 3.3% increase, while the West saw the sharpest decline at -24.7%. Metros that bucked the trend with significant inventory growth included Memphis, Tenn. (+30.3%), New Orleans (+26.0%), and San Antonio (+20.6%).
Listing prices remained supported by low inventory. Although national median list prices dipped seasonally to $425,000 in October from $430,000 in September, prices in larger metros still showed an upward trend. However, notable is the increasing share of homes with price cuts, indicating sellers' attempts to entice buyers in a high mortgage rate environment.
The median home stayed 50 days on the market in October, one day less than in 2022, indicating a continuing fast-paced market. In the country's 50 largest metropolitan areas, homes were typically listed for 42 days, which is two days shorter than October 2022.
While these statistics offer a snapshot of the current housing market, the unseasonal trends observed in October could hint at future shifts in the real estate landscape.
