Falling mortgage rates, plus the Fed’s recent rate cut, are perking up the fall housing market.
A new report from Realtor.com® found that in September, there were 11.6% more homes newly listed on the market compared with a year earlier.
That’s a “three-year high on the heels of falling mortgage rates and the Fed’s 50 bps rate cut,” notes Realtor.com economist Ralph McLaughlin in his analysis.
After several years of a “locked in” market where high rates had shut out buyers and made homeowners reluctant to sell, there’s finally movement. And with more cuts expected to be made this year, buyers and sellers are feeling more confidence about getting back in the market.
“We find that the lock-in effect is easing,” notes McLaughlin. “It’s likely that some sidelined buyers are coming back onto the field as both their buying power and home choices increase.”
A buyer’s market might be around the corner
All in all, McLaughlin’s research found 34% more homes for sale on a typical September day this year compared with last. That’s the highest number of active listings since April 2020.
In particular, McLaughlin notes that the surge in fresh listings is happening “the most in the more expensive markets where the nominal savings from lower mortgage rates are highest.”
Seattle (+41.8%), Washington, DC (+30.4%), and San Jose, CA (+27.1%), are among the metros with the largest growth in newly listed homes compared with a year ago.
“In fact, we find a strong correlation between the median-priced home in a market and the growth in newly listed homes compared to last year,” says McLaughlin. “We suspect this is at least partly due to the fact that homebuyers—who often are also home sellers—in more expensive markets benefit from higher nominal savings than buyers in less expensive markets.”
In other words, buyers in Seattle, Washington, DC, and San Jose are saving a greater amount on their monthly mortgages when they buy new homes than in markets where home prices and mortgage amounts are lower.
The South and West are swamped with listings
While the number of listings on the market is up in every region, the South saw the greatest increase year over year. Compared with last September, the South saw a 42% increase in listings, the West saw a 36.5% increase, the Midwest saw a 22.3% increase, and the Northeast gained 14.8%.
Cities across Florida—Tampa, Miami, and Jacksonville—were among the metro areas that experienced the greatest boom in listing levels, seeing increases of 74%, 67.9%, and 61.9% year over year.
Despite this improvement in the number of homes for sale, listing levels still continue to lag behind pre-pandemic levels.
“While inventory this September certainly continues to improve, it is still down 23.2% compared with typical 2017 to 2019 levels,” says McLaughlin.
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Home prices are down from last month
The median price of homes for sale this September decreased by nearly $5,000 from August, from $429,500 to $425,000. However, the median price per square foot grew by 2.3%, which means buyers are getting less bang for their buck.
To put it into perspective, per-square-foot prices have increased a whopping 50.8% compared with September 2019.
Overall, prices increased 2.8% in the Northeast and 0.6% in the Midwest, while they went down 0.2% in the West and 2.3% in the South.
Among the 50 largest metros, Rochester, NY (+13%), Milwaukee (+11.4%), and Cleveland (+9.3%) saw the biggest price increases year over year. Meanwhile, Miami (-12.4%), Cincinnati (-9.5%), and San Francisco (-8.9) had the biggest median price drops.
Plus, more sellers are offering price cuts on their listings. Around one-fifth of all listings (18.4%) offered cuts, a half a percentage point more than this time last year. Yet despite those cuts, the housing market overall has stayed steady.
“While market speed moved at the slowest rate for a September since 2019, buyers have been engaged just enough to keep prices from falling, with the median price per square foot rising on a year-over-year basis,” says McLaughlin.
Homes are taking longer to sell
The number of days homes spend on the market continues to creep up. In August, homes spent an average of 53 days on the market; in September, it was 55. This marks the slowest September in five years.
It’s important to remember, though, that these homes are staying on the market for less time than in the pre-pandemic era. In September, from 2017 to 2019, homes spent an average of 62 days on the market.
