The Blubber

The supply of homes for sale remains low by historical standards, but it's increasing rapidly.

Nationwide, active listings in August rose 36% compared to the same month last year, according to a report from Realtor.com. This marks the 10th consecutive month of annual growth. However, supply is still 26% lower than in August 2019, before the pandemic.

As inventory grows, sellers are pulling back. New listings in August were down 1% compared to the previous year. The increase in supply is largely because homes are staying on the market longer.

"This August, with more homes on the market, price reductions are becoming more common, asking prices are leveling off, and homes are taking longer to sell," wrote Danielle Hale, Realtor.com's chief economist, in a statement. "While the Fed's anticipated rate cut has already led to lower mortgage rates, it seems some buyers and sellers are waiting for further declines."

This is reflected in weekly mortgage data. Loan applications for home purchases are down about 4% compared to the same time last year, according to the Mortgage Bankers Association, even though the average rate on a 30-year fixed mortgage is about 75 basis points lower now than it was then.

While inventory is rising in most cities, some are seeing dramatic increases. Tampa, Florida’s supply is up more than 90% from a year ago, with San Diego up 80%, Miami up 72%, Seattle up 69%, and Denver up 67%.

Regionally, active listings rose 46% in the South, 35.7% in the West, 23.8% in the Midwest, and 15.1% in the Northeast.

As supply increases, homes are staying on the market longer. The typical home spent 53 days on the market in August, seven days longer than a year ago, marking the slowest August in five years.

"We found that the market slows by about one day for every 5.5 percentage point increase in the year-over-year number of active listings," said Ralph McLaughlin, senior economist at Realtor.com. "With the rapid growth in inventory now, some markets are seeing homes stay on the market 15-20 days longer than last year."

More supply and longer market times are finally driving prices down. In August, the share of homes with price reductions rose to 19%, up 3 percentage points from the previous August. The median list price dropped 1.3% year-over-year. This is partly due to a shift toward smaller homes on the market, though prices are still 36% higher than they were in August 2019.