This week’s blog is all about inventory (aka supply)

The rapid run-up in home prices we have experienced over the past couple of years is directly related to the lack of supply relative to high demand. I covered this in detail in last week’s blog post.

With that in mind, any increase in inventory will be a welcome sign to home buyers fatigued from months of multiple offers and bidding wars.

Continue reading below, or watch the following video, to see how inventory has changed over the past couple of months and what the change is likely to mean for both buyers and sellers in the months ahead;

The Impact of Mortgage Rates

While record-low mortgage rates fueled increased buyer demand over the past couple of years, rising mortgage rates haven’t noticeably decreased demand, at least not yet.

Besides seeing a little softening at the low end of the market, and amongst first-time homebuyers, demand overall remains strong. Whether it stays that way if mortgage rates push higher or inflation doesn’t moderate is another question.

As supply rises, it will likely feel as though the market is slowing significantly, but when you’ve been driving at 100 mph and slow to 90 mph, it will feel like you’re crawling even though you’re still moving fast.

Since Danielle was quoted as saying this, we did actually see year-over-year inventory growth for the first time this past week.

Here is a graph from March 2022 showing month-over-month inventory change;

While there are a few states showing positive inventory growth, represented by the darker blue color, the majority of the country is still showing inventory declines.

By comparison, here is the same graph from April 2022;

A big difference…..the entire country, except for 3 states, is now showing inventory gains.

What Does This Mean to You

For Buyers

The increasing inventory will bring some welcome relief. Going forward you will start to see waitlists at new home communities shrinking, while in the resale market, rather than competing against 20 other offers there might only be 2 or 3 on a given property. Bidding wars will also start to diminish and homes will likely start selling much closer to the list price.

For Sellers

Have you missed the peak? No, but don’t be alarmed if your home doesn’t receive 75 showings and 20 offers the first weekend. Heaven forbid you might even be on the market more than one weekend before receiving an offer😀 Days on market will likely increase as well, especially for those homes that are not in the best condition.
Buyers will increasingly be focused on value and sellers will have to take that into consideration when initially pricing their homes.

Price Reductions

We are already starting to an increase in the number of listings taking price reductions, but don’t take that as a sign that home prices are coming down. Price reductions are a normal part of every market. Typically, between 30% and 40% of all listings receive a price reduction before going under contract.

Prices have been rising so rapidly that many sellers have been pricing their homes high in the belief the market would catch up to their list price. As inventory builds that won’t happen. Buyers will be more hesitant to pay “any price” to get a house. As a result, those homes that were listed higher than they should have been will be forced to reduce their price in order to obtain an offer.

Every Market is Different

As the housing market cools, the pace of cooling will be different from market to market. We are seeing more cooling in Southern California than we are here in Frisco and Prosper, TX for instance.

The data reported by the major media outlets is often a couple of months old, whereas the data I use for my reports and updates, provided by Altos Research, is updated weekly so you can see trends and market shifts in well in advance.

Our weekly market report allows you to track activity for any City/Zip Code in the country. Here is the current market report for Frisco, TX;

To see the full report, click the image above. From the full report, you can use the search feature to see current conditions for any city or zip code in the country.

There are 2 data points about I want to call your attention to;

Price Decreases- as of May 16th, 18% of all Frisco listings had taken a price reduction. While this is still well below the normal range, it is up substantially from the 5% of listings taking a price reduction back in January.

Inventory - although way below pre-pandemic levels, inventory continues to climb week-over-week.

Bottom Line

The fundamentals of the housing market remain strong, especially here in Frisco and Prosper, even though there are increasing signs of the market starting to shift across the country.

While I do expect market conditions to cool, I don’t expect to see any major reduction in prices or declining market conditions in the year ahead. None of the local economic experts are forecasting that and price appreciation is expected to continue through 2026, albeit at a slower pace than we have seen in the last couple of years.

CLICK HERE to see the Newest Frisco Property Listings

If you have additional questions about the market or want to know if this is a good time to consider buying or selling a home, give us a call at 469-296-5230 or email Contact@S2RealEstateTeam.com