Photo: Ken Lund/Flickr
It’s no coincidence that home price appreciation across the US is slowing as inventory grows, according to a recent study by First American.
Increased inventory could bring an end to fierce bidding wars and turn the tide of the national housing market to favor buyers.
“It’s been six years since the end of the last one, but the rare buyer’s market may be in the housing market’s future,” writes First American chief economist Mark Fleming in a statement.
The number of homes on the market increased from last year in 21 of the 50 largest US cities in July.
The cities that recorded the largest annual gains in active listings were: Denver, Colorado (87 percent), Columbus, Ohio (59.3 percent), San Jose, California (47.6 percent), Seattle, Washington (27.6 percent), and Washington, D.C. (24 percent).
Excluding Columbus, all of the cities in the top five are among the most expensive housing markets in the country.
“The seller’s market may be coming to an end. As more inventory enters the market, buyers have more options, bidding wars are less likely and sellers will start reducing listing prices,” writes Fleming.
But home prices are greatly influenced by the law of supply and demand.
As housing supply increases relative to demand, price appreciation typically slows — as was seen in nearly half of the largest cities in July.
But rising home prices and increasing mortgage rates have eroded affordability in some markets — particularly for first-time buyers who simply may not be able to find anything in their local market in their price range.
The supply shortage, however, appears to be easing only among higher-end homes nationally.
In July, the inventory of homes valued below $200,000 was down 15.6 percent year-over-year nationally, but the supply of homes that cost more than $350,000 increased 5.7 percent.
“Local market trends support this overarching national trend, since it appears that the supply shortage is primarily easing in more expensive cities,” writes Fleming.
National inventory levels have increased modestly since December 2017, which marked a 25-year low-point. Inventory turnover — the total supply of homes for sale nationwide as a percentage of occupied residential inventory — was 1.66 percent last December.
Meaning that only 166 homes in every 10,000 were for sale — well below the historical average of about 250 in every 10,000.
Then in July 2018, the inventory turnover rate rose to 1.74 percent. And while July’s reading is still below historic levels, it marked the first time inventory reached that level since July 2017.
For the study, First American used data from the listing site realtor.com.
Click here to read the entire study.