A historic housing shortage brought on by the punch of slow construction and high pandemic-induced demand is finally starting to ease.
Active home listings jumped 19% in June, the fastest annual pace since Realtor.com began tracking the metric five years ago. And the number of new registrations during the month finally exceeded typical pre-Covid levels, up 4.5% from a year ago. Overall inventory, however, is still around half of pre-Covid levels.
Some markets that saw the biggest increases in demand during the pandemic are now among those seeing the biggest increases in supply: Austin stocks are up nearly 145% from a year ago. year, Phoenix by 113% and Raleigh by nearly 112%. Other markets are still seeing their supplies fall: Miami is down 16%, Chicago is down 13% and Virginia Beach is down 14%.
“We expect to see additional inventory growth in July, building on the accelerated improvements seen throughout June,” said Danielle Hale, chief economist at Realtor.com, adding that the gains in supply increased as the month progressed.
And Hale said even more homeowners may decide to sell, adding new supply as buyers grapple with higher costs and struggle to find homes that fit their budget.
Yet the expansion of supply is not yet mitigating exorbitant house prices. The median listing price in June hit another record high of $450,000 according to Realtor.com. Annual gains ease slightly, but continue to increase by almost 17%. This is partly because the share of larger and more expensive homes is increasing.
The costs of owning a median-priced home in the second quarter took up 31.5% of the average U.S. wage, according to a new report from ATTOM, a real estate data provider. That’s the highest percentage since 2007 and up from 24% the previous year, marking the biggest jump in more than two decades. Lenders generally consider a 28% debt-to-equity ratio to be the upper limit for mortgage approval. This is why some potential buyers no longer qualify for a mortgage.
As a result, the affordability of buying a home in the second quarter fell 97% nationwide, according to ATTOM. That’s up from 69% in the same quarter a year ago, and the highest reading since just before the Great Recession housing crash.
ATTOM calculates affordability for average earners by determining the amount of income needed for the major expenses of home ownership at the median price, assuming a loan of 80% of the purchase price and a maximum debt ratio of 28%.
“With interest rates nearly doubling, homebuyers are facing monthly mortgage payments that are between 40% and 50% higher than a year ago – payments that many potential buyers cannot afford. just can’t afford,” said Rick Sharga, executive vice president of business intelligence at ATTOM.
A few factors could thwart continued growth in inventory levels, including a pullback from potential sellers who may decide to wait for the market to strengthen again. Still, Hale of Realtor.com noted that new and pending home sales were up this month, so some people might think now is the time to buy.
“As expectations of higher future mortgage rates rise, homebuyers today may be more motivated, especially now that they see more options to choose from,” Hale said.