After months of declines, the amount of active housing inventory recorded its first year-over-year increase since June 2019, according to Realtor.com’s May Housing Trends Report, published Thursday.
Active listings recorded an annual increase of 8% in May, although the number of available homes remains a staggering 59.6% lower than May 2019.
On average, active inventory in the 50 largest markets increased 14.9% year over year. Leading the way was Austin, Texas as the metro with the largest annual increase in inventory at 85.8%, followed by Phoenix (67.1%), and Sacramento, California (54.6%).
Regionally, the greatest gains were in the West (33.6%) and the South (18.3%).
The number of active listings posted annual decreases in eight markets, with Miami (32.1%), Virginia Beach, Virginia (19.3%), and Richmond, Virginia (15.3%), posting the largest yearly decreases in active inventory.
The number of new listings also rose in May, posting a year-over-year increase of 6.3%, which is the largest increase seen in any month in nearly three years. The report attributed the increase to sellers feeling more confident about listing this spring compared to last, when the COVID-19 vaccine was just being rolled out.
In total, 30 markets posted a year-over-year gain in newly listed homes, with the largest increases recorded in Raleigh, North Carolina (27.9%), Nashville, Tennessee (22,8%) and Las Vegas (20.7%).
The average size of the houses going on the market also grew. Among May’s new listings, the share of homes as large as 1,750 square feet dropped to 45.7% from 47.3% a year prior, while the share of homes with more than 1,750 square feet increased from 52.7% to 54.3%.
“Among key factors fueling the inventory comeback are new sellers, who are listing homes at a rate not seen since 2019, as well as moderating demand, with pending listings declining year-over-year in May,” according to a statement from Danielle Hale, the chief economist for Realtor.com.
Buyer demand also started showing signs of softening. The report cited two indicators of softening buyer demand. First, the median listing price of a typical pending listing decelerated in May compared to April, to a yearly rate of 16.2% from 17.2%. The share of active listings with price reductions also increased 3.5 percentage points from a month prior to 10.5%.
Typically, an increase in housing inventory and softening buyer demand would lead to a decline in home prices, but that wasn’t the case in May. Nationwide, the median home price hit an all-time high of $447,000 in May, rising 17.6% year over year.
Experts say there are two main reasons home prices continued increasing in May: It’s partly because of the growing share of newly listed larger homes for sale and because some sellers haven’t adjusted to the shifting supply and demand dynamics.
Among the nation’s largest metro areas, active listing prices increased an average of 13% year over year, with the largest price gains recorded in Miami (45.9%), Nashville (32.5%) and Orlando, Florida (32.4%).
Six large markets on the other end of the spectrum recorded annual decreases in the median listing price, with Pittsburgh (10.5%), Rochester, New York (9.7%) and Cincinnati (9.6%) recording the largest decreases.
Despite an increase in the number of active listings and softening buyer demand, buyers typically purchased listings within 31 days of a home hitting the market, faster in May than in any month in the Realtor.com data history, dating back to July 2016. It’s an average of six days faster than a year ago.
Across the 50 largest metro areas, homes typically spent 26 days on the market, a year-over-year decrease of 6 days. Homes in Miami saw the largest annual decline in time spent on the market with a decrease of 28 days, followed by Hartford, Connecticut, Seattle and San Jose, California, which all had a decrease of 12 days.
Detroit was the only metro area where there was a year-over-year increase in time a home spent on the market, with an increase of 1 day.
“While this real estate refresh is welcome news in a still-undersupplied market, it has yet to make a dent in home price growth, partially due to increases in newly-listed, larger homes and because the typical seller outlook is quite high, likely shaped by recent experiences of homeowners who sold,” said Hale of Realtor.com. “Importantly, as 72% of this year’s sellers also plan to purchase a home, seller expectations will likely start to reflect buyers’ needs. In an early sign, the rate of sellers making price cuts accelerated in May.”