The US housing market, which has been plagued by soaring prices and limited supply, is showing some signs of improvement. Inventory, which typically declines at this time of year, is actually increasing, according to Altos Research. Additionally, more home sellers are lowering their asking prices, as reported by Redfin. These indicators may provide a glimmer of hope for prospective homebuyers who have been struggling to enter the market.
Although the housing market has been stuck with sluggish sales activity due to high mortgage rates, recent data suggests a shift in the right direction. Home construction continues to drive up supply, leading to an increase in housing inventory during a season when it usually declines. Altos Research noted that inventory grew by nearly 2% in the last week of September, a noteworthy reaction to the highest mortgage rates in over two decades. While borrowing costs have been a major factor in keeping supply low, there are signs that prices may be headed lower.
In addition to an increase in housing inventory, more homes on the market are taking price cuts from their original list price. Altos Research reports that 37% of homes have had a price reduction, which is higher than what is typically seen in a balanced market. Redfin also confirms this trend, stating that more home sellers are dropping their asking prices. This adjustment is a response to the hesitation of buyers caused by mortgage rates above 7% and the reduced likelihood of multiple offers. As sellers become more open to negotiation and concessions, builders are also adapting by offering smaller properties or rate buydowns. However, with expectations of a Federal Reserve interest rate hike, sellers may need to be prepared for further price reductions in the fourth quarter.