The growth is potentially a big deal for homebuyers for multiple reasons. As inventory grows, buyers have a wider selection of homes to choose from. More homes for sale can help reduce bidding battles among buyers for a home purchase. And higher housing supply may put more pressure on sellers to cut listing prices.
There were 3% more homes for sale nationally in October than the same time a year ago, according to a new report. The online real estate firm Zillow reported inventory fell for 44 straight months on an annual basis before realizing the uptick. A 1% jump in inventory in September spurred a greater gain in October, a possible sign of future gains in available inventory.
The surges came after inventory declined last October at a 10.2% annual pace. Expensive markets that were among the nation’s hottest saw some of the biggest inventory gains. Take San Jose, California. It had the biggest annual inventory jump, adding about 1,500 homes to boost inventory by 93.1% from last October. San Diego, San Francisco, and Seattle also experienced the greatest increases in the number of houses for sale.
Still, rising mortgage rates could dampen the rising housing stock if the higher rates scare off potential buyers.
“In yet another sign that the housing market is cooling, we’re finally starting to see inventory return after several years of annual declines,” Zillow Senior Economist Aaron Terrazas stated in a press release. “The combination of tight supply and strong demand have pushed up home values in recent years, but markets always ebb and flow and there is no doubt that the tides that have buoyed sellers are shifting.”
Terrazas added, “Buyers are not out of the woods yet: While there are more homes for sale, rising mortgage rates are quickly eating into what they can afford to pay. First-time buyers have benefited from flat or falling rents over the past year—making it somewhat easier to save for a down payment—but the decline in rents could be short-lived if higher buying costs push some people back toward the rental market.”
On the home appreciation front, Zillow reported median home value nationally at $221,500, up 7% from this time last year. The median rent is $1,442, down 0.1% ($1 per month) year-over-year, the second straight month of annual rent declines.
But before purchasing a home, here are some tips for buyers to consider:
- Identify a realtor to work with that’s in your area. Real estate agents can offer helpful insights, including disclosing how fast homes are selling and for what price. They often can help you negotiate a price to make your offer stand out over others. To find an agent in your area, enter your zip code at www.realtor.com/realestateagents
- Know your budget and stick to it. Before you even start shopping, figure out what you can afford to spend by receiving a pre-approval from a lender to learn the amount of money you’re qualified to borrow. When determining your final budget, examine other costs of homeownership, including property taxes, insurance, and utilities. If listings are scarce in your market, home prices are likely to rise as bidding for available houses drive them up.
- Avoid cases where you are competing against other buyers and counteroffering over what you can actually afford. Don’t be afraid to back off if the price exceeds your budget.
- Identify needs versus wants.
As you begin home searching, focus on what features you really want against what you can live with or without. For instance, ask yourself questions like do you want a three-bedroom home with an attached garage and basement? Do you want to be in a certain school district or near your job? Sites like Realtor, Zillow, and Trulia, and others can help with that research.
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