The historic housing shortage caused by the one-two punch of slow construction and strong demand caused by the pandemic is finally starting to ease.
Active home listings grew 19% in June, the fastest annual rate since Realtor.com began tracking the figures five years ago. And the number of new listings for the last month surpassed typical pre-Covid levels, up 4.5% from a year ago. However, overall inventory is still around half of pre-Covid levels.
Some of the markets that saw the biggest increase in demand during the pandemic are now among those with the biggest increase in supply: Austin’s inventory is up nearly 145% from a year ago, Phoenix is up 113%, and Raleigh is up nearly 112%. Other markets are still seeing supply declines: Miami is down 16%, Chicago is down 13% and Virginia Beach is down 14%.
“We expect to see additional inventories in July, based on the rapid improvements seen throughout June,” said Danielle Hale, chief economist at Realtor.com.
And Hale said even more homeowners may decide to sell, adding new supply as buyers struggle with higher costs and difficulty finding a home that fits their budget.
However, the expanding supply has not yet dampened sky-high house prices. The median list price in June hit another record high of $450,000 according to Realtor.com. The year-over-year increase is easing slightly, but is still up nearly 17%. That’s partly because the share of larger, more expensive homes is on the rise.
According to a new report by ATTOM, a real estate data provider, the average cost of owning a home in the second quarter needed 31.5% of the median US wage. That was the highest percentage since 2007 and up from 24% the year before, marking the biggest jump in more than two decades. Lenders typically consider a 28% debt-to-income ratio as the ceiling for approving a mortgage. That’s why some of today’s potential home buyers no longer qualify for a mortgage.
A ‘for sale’ sign is hung in front of a home on June 21, 2022 in Miami, Florida. According to the National Association of Realtors, existing home sales fell 3.4% to a seasonally adjusted annualized rate of 5.41 million units. Sales were 8.6% lower than in May 2021. As sales of existing homes fell, the median price of a home sold in May was $407,600, up 14.8% from May 2021.
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As a result, affordability to buy a home in the second quarter fell by 97 percent nationally, according to ATTOM. This is up from 69% in the same quarter a year ago and is the highest reading since just before the housing crash during the Great Recession.
ATTOM calculates affordability for average wage earners by determining the income required for primary home ownership costs for a median-priced home, assuming an 80% loan purchase and a maximum debt-to-income ratio of 28%.
Rick Sharga, executive vice president of market intelligence at ATTOM.
Several factors can hinder continued inventory growth, including retracement from potential sellers who may decide to wait for the market to strengthen again. However, Realtor.com’s Hale notes that sales of new and pending homes have increased this month, so some people may feel now is the right time to buy.
“As expectations for future mortgage rates are higher, today’s homebuyers can be more motivated, especially as they’re seeing more options to choose from,” Hale said.
