Realtor.com just issued its July Housing Report. Commenting on the trends she saw, Realtor.com Chief Economist Danielle Hale said that smaller houses with lower prices have started to hit the market. In particular:
This is shifting the housing market balance in a more buyer-friendly direction, but buyers may not see as much price moderation as suggested by the national trend because it’s partly attributed to a shift toward smaller homes for sale. Still, if these changing inventory dynamics continue, we could see a wave of real estate activity heading into the latter part of the year.
That is certainly an indication that prices could go even higher, a trend last seen in 2005 and 2006. At this point, Realtor.com’s analysis shows median prices for listed homes nationwide rose 10.3% year over year in July to $385,000.
Why has this happened in the housing market recently? Home prices have exploded upward in recent months. The carefully followed S&P Case-Shiller Indexes show that, nationally, home prices rose over 16% year over year in May. One market, Phoenix, posted a price increase of over 20% for the same period. The increase has been driven by the migration of people from the large coastal cities, which often have the highest home prices and highest costs of living. Working from home has allowed people to relocate. Furthermore, mortgage rates have made many homes affordable because the rates are historically low.
A review of the 50 largest metro markets shows that demand for homes in some markets means that inventory turns over at a feverous pace. The typical U.S. home for sale was on the market for only 38 days in July. That is 22 days faster than in the same month of last year.
In some markets, a house stays on the market for well under 38 days. In Columbus, Denver, Nashville and Rochester, the median days on the market figure was 17. From July a year ago, that was down 21 days, 19 days, 14 days, 12 days, respectively.
Presumably, inventory that moves this quickly also drives up prices. Not always. The active median listing price in Rochester in July was $240,000, which was down 4% from in the same month last year.