Inventory Growth Fueled by Softening Demand, Not More Sellers

Mike Sorohan msorohan@mba.org

April 25, 2019

Zillow Inc., Seattle, reported while for-sale home inventory rose in March, fewer new listings have come onto the market in each of the past four months.

The company's monthly Real Estate Market Report said while overall inventory in the U.S. is 1.2% higher than a year ago, new listings fell by 6.1% over the same period.

The report also noted homes are staying on the market for longer--the median time on market increased four days in February from a year prior, the first such increase in four years and the largest since 2011.

Zillow Director of Economic Research Skylar Olsen said these trends indicate that the inventory growth is driven largely by cooling demand, not more home sellers.

"There is a narrative that inventory is growing, which favors buyers. But the how and why is important," Olsen said. "There may be more homes available for sale over the course of the month, but that's because more leftovers from previous months are sticking around. In truth, fewer homeowners are putting their homes on the market and buyer demand is falling back. Buyers won't have as much competition this shopping season and can take more time finding the perfect match, if it's out there."

Zillow said the share of listings with a price cut is higher than this time a year ago in 33 of the nation's 35 largest housing markets. Price cuts are more prevalent in the most-expensive third of homes for sale, as 16.2% of top-tier homes have a price cut compared to 11.8% of bottom-tier homes.

The report said national home values grew 6.6% year-over-year, and the median home is now worth $226,700. The rate of appreciation has slowed each month since peaking at 8% growth in December.

Home values in San Jose, Calif., the most expensive of the 35 largest housing markets in the country, fell 0.2% from this time last year. This is the first time in four years that home values have depreciated on a year-over-year basis in any of the top 35 markets, and the first drop in San Jose in seven years.

The report also said rent prices rose for the fifth straight month, up 2.5% on an annual basis. The median U.S. rent is $1,474. Rents grew fastest in Southwest markets Las Vegas (up 7.6%) and Phoenix (up 6.7%).

Meanwhile, Redfin, Seattle, reported homes with open houses sell for $9,046 more and spend seven fewer days on the market than homes without open houses.

Redfin Chief Economist Daryl Fairweather said benefits associated with open houses vary by metro, and they likely have more to do with the desirability of the homes themselves than the open house itself.

"In many areas, homes that are already primed for competition tend to be the ones with open houses because the listing agent knows it will attract a lot of attention and wants to set up a convenient way for multiple potential buyers to pop in at once instead of making several appointments for private tours," Fairweather said.

Redfin said in San Francisco, homes with an open house during week one sold for 7.9 percent more relative to their list price than homes with no open house, the biggest premium of any metro area in the U.S. In nearby San Jose, homes with open houses sold for 5.2 percent more and in Raleigh, North Carolina, homes with open houses sold for 4.6 percent more relative to their list price than those without. For a home in Raleigh listed at the metro area's median sale price of $286,000, that could mean a difference of more than $13,000 in the ultimate sale price.

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