The US housing market, which has been struggling with high mortgage rates and low inventory, is starting to show some signs of recovery for homebuyers. According to recent reports, more homes are hitting the market, more sellers are lowering their asking prices, and home construction is driving up the valuation of the housing sector.
Inventory Rises in Unusual Season
One of the main challenges for homebuyers in the US has been the lack of available homes for sale, which has pushed up prices and created a competitive market. However, some data suggests that this trend may be changing, as inventory is growing at a time of year that usually sees declines.
According to Altos Research, a real estate data firm, inventory rose 1.8% in the last week of September compared to the week before. This is unusual for late summer, when new listing volume normally declines and the last sales of the peak season conclude. Altos Research said that this increase in inventory is “quite telling” for how home buyers are reacting to the highest mortgage rates in over two decades.
The 30-year mortgage rate hit the highest level in 23 years, climbing further above 7%. This has made borrowing more expensive for prospective buyers, and also discouraged potential sellers from listing their homes, as they would lose their low-rate mortgages by moving out. However, it seems that some sellers are now willing to take the risk, or are forced to sell due to life events, such as marriage or job changes.
More Sellers Drop Their Asking Prices
Another sign of hope for homebuyers is that more sellers are dropping their asking prices, indicating that they are adjusting to the market conditions and becoming more realistic about their expectations. According to Redfin, a real estate listing site, during the four weeks ending September 24, 6.5% of US homes for sale had a price drop, an uptick from 5.8% in August.
Redfin said that it is still tough to win a home for under asking price, but sellers have come to terms with the fact that high mortgage rates are giving buyers cold feet and that homes are less likely to attract multiple offers. This may give buyers more room to negotiate and find a better deal.
Altos Research also reported that more homes on the market have taken a price cut from their original list price, putting the latest share at 37%, which is more than what a normal balanced market would typically see. Altos Research said that this shows that sellers are becoming more flexible and responsive to buyer feedback.
Home Construction Boosts Housing Valuation
Despite the challenges in the housing market, there is one sector that is thriving: home construction. Newly constructed homes are driving up the US housing market valuation and are forecasted to make up a bigger slice of all home sales.
According to Business Insider India, the US housing market valuation climbed to a record $52 trillion in August, up from $49 trillion in July. This was driven by a surge in new home construction, which accounted for 16% of all home sales in August, up from 13% in July.
Newly built homes are appealing to buyers who are looking for more space, modern features, and energy efficiency. They also offer an alternative to existing homes, which may have deferred maintenance issues or outdated designs. However, new homes also tend to be more expensive than existing homes, and may face supply chain disruptions and labor shortages that could delay completion or increase costs.