U.S. Home Listings Surge as Inventory Grows, but Buyer Hesitancy Persists

New listings of U.S. homes for sale increased by 7.9 percent year-over-year during the four weeks ending February 2, marking the largest rise since late last year, according to a new report from Redfin.

On the buying side, pending sales have shown a slight improvement from the previous month, though they remain down by 8.1 percent compared to a year ago. The story is similar at earlier stages of the homebuying process. Redfin’s Homebuyer Demand Index, a seasonally adjusted measure of home tours and other buying activities, saw a small uptick from the week prior but continues to hover near its lowest level since last spring.

The surge in new listings, combined with slower sales, is creating a larger selection of homes for buyers. There is now five months’ worth of inventory on the market, up from 4.4 months a year ago, and the highest level in six years, excluding the previous four-week period.

This increase in inventory has led to homes selling for less than their asking price. The typical home is now going for 2 percent below the list price, the largest discount in nearly two years.

“Listings are picking up as we move toward spring,” said Joe Paolazzi, a Redfin Premier agent in Pittsburgh. “Homeowners have been holding off, waiting for mortgage rates to drop or for market conditions to improve, and now it seems clear that rates have decreased as much as they’re likely to for now. Sellers are also realizing that, despite fewer buyers in the market, those who are actively searching are serious and willing to pay a fair price. We’re seeing bidding wars for homes in desirable neighborhoods and investment properties that are easy to rent.”

Redfin noted several reasons why potential buyers are still hesitant. First, although homes are often selling below asking price, prices remain near historic highs. Persistently high home prices and mortgage rates have pushed the median monthly housing payment to $2,784, an 8.3 percent increase year-over-year and just $21 shy of the all-time high. However, mortgage rates dipped below 7 percent this week for the first time since mid-December.

Second, some buyers are holding off due to uncertainty surrounding federal economic policy. Finally, severe winter weather, including snow and extreme cold across the Midwest, Northeast, and South, kept many homebuyers indoors in January.