Lower mortgage rates are prompting higher demand from home buyers to buy, but they aren’t finding enough homes for sale. Mortgage rates last week reached the lowest average since November 2016.
“July’s data highlight tension in the housing markets between buyers eager to take advantage of lower mortgage rates and potential sellers concerned about slowing price growth,” says George Ratiu, realtor.com®’s senior economist. “The decline in newly listed properties suggests that some would-be sellers are stepping back from the market, during the peak buying season, when most people are searching for their next home.”
July saw flat inventory growth, which realtor.com® researchers say could lead to inventory declines much sooner than originally anticipated. Newly listed properties were down 7% in July compared to a year ago, realtor.com® reports.
The national median home price in July was $315,000, up 5.5% from a year ago but down from last year’s annual growth of 8.7%. Also, home prices in July were down 0.2% from June, which marks the earliest seasonal slowdown in home prices since 2012. The median number of days on market in July was 58, the same as a year ago.
The number of homes available in the entry-level segment of price brackets continues to shrink, prompting greater challenges for entry-level and first-time buyers.
The inventory of properties priced below $200,000 in July fell 9.9% year over year. On the other hand, the inventory of homes priced above $750,000 rose 6.6%.
Buyers will face more competition for entry-level homes. Homes priced below $200,000 spent just 56 days on the market, compared to properties priced over $750,000, which averaged 81 days on the market, according to realtor.com® data.
Still, many young adults are finding some success entering the market. The share of millennial mortgage originations rose to 46% from 43% last year. The median home purchased by millennials was $248,000, up 5% year over year. That is also a bigger home price increase than Generation X or baby boomers faced.
“The larger gains in the price of homes purchased by millennials reflect both the intense competition at the entry-level price point and the fact that some millennials have been delaying major life milestones (e.g., starting families, forming households, having children), and are skipping the starter home to purchase larger, trade-up homes,” the report notes.