This spring, potential home buyers are experiencing a more favorable market as the number of available homes reaches its highest since 2020, as per Realtor.com’s latest monthly report.
Key insights from the report include:
- A significant increase in the frequency of price reductions, which are expected to be more common now than they were during the period from 2020 to early 2022, according to Danielle Hale, Realtor.com’s chief economist.
- The Southern region, especially Florida, is experiencing a notable increase in the percentage of homes with reduced prices.
- The number of homes on the market has risen by 23.5% compared to the previous year.
Although the current spring season remains challenging, there are positive indicators for prospective buyers. As the inventory of homes on the market continues to expand, the prevalence of price reductions has grown. Realtor.com’s March Housing Report indicates that price reductions have reached 15%, which is a 2.2 percentage point increase compared to the same period last year and marks the highest level in five years.
The Southern region has seen the most significant year-over-year increase in price reductions, with a 3.5 percentage point rise, followed by the Midwest (1 percentage point), Northwest (0.5), and West (0.2). Hale notes that sellers are becoming more accepting of the current market conditions and are listing their homes in greater numbers, despite the possibility that market mortgage rates may be higher than their existing rates.
Although price reductions are more common compared to recent years, they are similar to the levels seen in 2019, suggesting that this spring will likely see a continuation of this trend, with price cuts being more prevalent than in the past two years.
In terms of inventory, economists like Hale are closely monitoring pending listings to determine if the increase in available homes is attracting more buyers. Preliminary data indicates that listed homes are generally selling quickly, although it is still early to draw definitive conclusions.
Florida has a high rate of price reductions, with four out of the top ten metro areas with the largest reductions located in the state. Tampa leads the list with a 27.6% reduction rate. Texas also has three metro areas in the top ten, including Austin (22.3%), San Antonio (21.8%), and Dallas (19.5%).
Despite higher mortgage interest rates making this a less favorable season for buyers, the increase in listings is expected to stimulate some markets and result in more sales, according to Selma Hepp, chief economist at CoreLogic. However, she also notes that the overall imbalance between buyers and sellers is likely to result in another competitive spring home-buying season and continued growth in home prices.
Active listings have been steadily increasing, with the inventory of homes for sale in the first quarter reaching its highest level since 2020. Nonetheless, the inventory remains 37.7% lower than the pre-pandemic levels of March 2019. Florida is leading this rise in inventory, with Tampa, Orlando, and Miami seeing significant year-over-year increases in active inventory.
The majority of inventory growth is occurring in the 200,000 to 350,000 price range, which presents opportunities for first-time home buyers.