Over the last few years, the housing market has been a wild bumpy ride of high interest rates, skyrocketing housing prices, low inventory and unbelievable bidding wars. But as we move further away from the unpredictable times of the pandemic, things are shifting.
Mortgage rates are slightly down and hovering around 6.74% for a 30-year fixed loan, according to Freddie Mac, and more houses are becoming available again in several markets, per the National Association of Realtors.
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In addition, new data from Realtor.com finds the U.S. is surging with more home supply in major cities with Denver, Austin and Seattle taking the top three spots in terms of growth. The uptick indicates where the market is heading, and Hannah Jones, senior economic research analyst at Realtor.com, explains why it matters.
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What the Growing Home Supply Means
Homebuyers might finally get relief. Many have been waiting for a more affordable market with more options to buy and we could be heading there.
“At a national level, today’s housing market is the most buyer-friendly market in nearly a decade,” Jones told GOBankingRates. “This is even more true in these markets where supply has surpassed pre-pandemic levels and means that buyers have a bit more negotiation power, and sellers are more flexible to grab buyer attention.”
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Why an Inventory Comeback Is Significant
When inventory was low, sellers had all the power, but that’s starting to change.
“Even before the pandemic, a long-standing mismatch between housing supply and demand meant that sellers were more so in the driver’s seat than buyers,” Jones said.
While more inventory is good for buyers, there’s a catch.
“Home supply is piling up in large part because buyer activity is tracking towards what we expect will be the lowest year of existing home sales since 1995 due to still-challenging affordability conditions,” according to Jones.
“Mortgage rates have remained above 6% for almost three years, and listing prices have not corrected significantly in many markets, which keeps buyers on the sidelines.”
A low housing supply has kept pressure on prices even though housing costs were already out of reach for many potential buyers, but there’s now a shift.
“Home supply exceeds demand in many markets, pushing sellers to reduce their asking price, or price lower to begin with,” Jones said.
Denver Housing Market Rapid Growth
The Denver housing market is exploding, which is good news for homebuyers. According to Realtor.com’s data, the Colorado city has experienced the largest housing recovery with a 100% jump in available homes since 2017 to 2019 averages.
“For-sale housing inventory in Denver has doubled compared with the pre-pandemic norm, providing a clear sign of a housing market realignment,” said Danielle Hale, chief economist at Realtor.com in a press release. “In some areas, affordability concerns have also slowed buyer demand, giving the market room to breathe and contributing to gains in homes for sale.”
One common denominator for the cities rebounding is new builds.
“This milestone underscores both the importance of enabling housing construction and the growing divide in housing conditions across regions, where some markets are rapidly normalizing and others remain stuck in low-supply dynamics,” Hale said.
Austin Is Having a Major Housing Supply Moment
The housing supply in Austin has increased 69% and Jones said that’s due to a number of reasons.
- The Austin housing market boomed during the pandemic as remote workers relocated to the relatively-affordable metro. Inventory levels cratered and home prices sky-rocketed as the market heated up. However, once mortgage rates climbed and companies started to bring remote workers back to office, demand cooled.
- High home prices and climbing mortgage rates meant that buying a home was no longer possible for many households, and the resulting pull back in demand let home supply recover. Additionally, the boom in demand for Austin-area homes led to a boom in new construction. Falling demand and climbing supply of newly-built homes sent inventory levels to the highest level seen in the data’s history in Austin.
- Finally, pandemic-era multifamily construction boosted rental supply in Austin, making it a far more affordable city for renting compared to buying.
Washington Housing Market is Expanding
Seattle’s housing inventory is up by 60.9%, which is happening for three reasons, according to Jones.
- Seattle’s historically-tight housing market has moved towards more balance in recent months as affordability challenges continue to limit demand and recent zoning reforms help boost supply. Recent data found that Seattle is among the top markets losing popularity with locals, with 8 in 10 home shoppers looking at properties elsewhere.
- Affordability challenges spurred the adoption of a statewide “missing middle” housing law which mandates that cities allow duplexes, triplexes, quadplexes, and similar housing in zones previously limited to single-family homes, per MSRC.
- Additionally, Seattle itself is rolling out the One Seattle Comprehensive Plan, which upzones single-family lots to allow for more units. Though the “One Seattle” plan has only recently been approved, it could have significant long-term impacts on home supply and affordability in the metro.
As the housing market fluctuates and slowly gives homebuyers a break, we’re not in a buyer’s market yet, Realtor.com research shows, but it is becoming more “buyer-friendly.”
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This article originally appeared on GOBankingRates.com: 3 Cities That Have More Home Supply Today Than Before the Pandemic (and Why That Matters)
