Home Prices Rise as Inventory Crunch Continues, Report Shows

For the second month in a row, home prices rose on an annual basis in September (+0.4%) as the inventory shortfall lingers, with the number of homes on the market falling year over year for the third consecutive month (-4.0%), according to the Realtor.com® September Monthly Housing Trends Report released today. Active inventory remained 45.1% below pre–pandemic (2017-2019) levels, although the number of homes for sale increased month-over-month (4.9%) in September, contrary to typical seasonal trends but attributable to the unusual bump in new listings in August.

This month, new listings realigned with typical declines between August and September. However, despite persistent inventory challenges bolstering prices, an unseasonable month-over-month uptick in price reductions hints at potential market adjustments. While a greater share of homes saw price reductions during the past month than expected for this time of year, the percentage of homes with price reductions decreased year over year, from 20.2% in September of last year to 17.8% this year, and remains below typical levels seen from 2017 to 2019. This suggests that buyer and seller expectations aren’t significantly misaligned, at least for now.

“An uptick in homes with reduced prices is a small break for buyers on top of the usual seasonal factors that align to make this first week in October the best week to buy. Yet, the larger context remains challenging. Buyers still struggle with the triple threat of rising listing prices, record-high mortgage rates, and limited inventory, making affordability a continued concern,” said Danielle Hale, Chief Economist for Realtor.com®. “The number of homes for sale is likely to remain low as higher mortgage rates leave many homeowners feeling ‘locked in’ to their current rates. Data shows low inventory is pushing many homebuyers toward new homes, but the growth in new construction isn’t enough to sufficiently narrow the inventory gap.”

Metro Phoenix home prices and inventory

Median Listing Price: $532,000

Median Listing Price YoY: +7.6 %

Median Listing Price per square foot YoY: +0.6 %

Active Listing Count YoY: -44.3 %

New Listing Count YoY: -20.8 %

Median Days on Market: 39

Median Days on Market Y-Y (Days): -7

Price Reduced Share: 24.4 %

Price Reduced Share Y-Y (Percentage Points): -20.4 pp

What it means for homebuyers, sellers, and the housing market

While the unexpected rise in new home listings from July to August led to higher September inventory than typically seen this time of year, homes are selling quickly, keeping overall inventory limited. This scarcity has been a driving factor in maintaining high listing prices.

Despite a greater share of homes with price reductions, affordability headwinds continue: higher mortgage rates have increased the monthly cost of financing 80% of the typical home by roughly $256 (+12.4%) compared to a year ago, far outpacing wage growth (+4.3%) and inflation (+3.7%).

“Homes on the market are still moving quickly, indicating that many buyers are accepting today’s high prices and mortgage rates and adjusting their expectations,” said Realtor.com®‘s Executive News Editor Clare Trapasso. “That may mean a number of things: settling for less space or moving farther away from large cities or to a different region.”

To help determine their best next step, potential homebuyers can tap into Realtor.com® RealCost tools, including the Affordability Calculator or the Rent vs. Buy Calculator. 

Listing prices stay steady, but price cuts climb uncharacteristically

In September, the national median home listing price declined seasonally from August, but increased slightly over September 2022, marking the second month in a row that listing prices have increased on an annual basis. Limited inventory has kept listing prices high, and while new home sales are elevated, new construction hasn’t been able to fully address inventory constraints. Meanwhile, although the share of price-reduced homes is down compared with last September, month-over-month growth is beginning to mirror last year’s trend, with price cuts accelerating in the fall as high listing prices and interest rates deter many buyers.

  • While the U.S. median list price saw a seasonal monthly decline, to $430,000 from $435,000 in August, it is up +0.4% compared to last year.
  • All regions saw active listing prices in larger metros increase on average, but Northeastern metros saw the highest annual growth rate (+10.0%).
  • Prices in Los Angeles (+23.8%), San Diego (+18.2%), and Richmond, Va.. (+15.0%) saw the biggest increases among large metros, predominantly due to larger and more expensive homes coming on the market in these areas. Larger Southern metros saw the lowest listing price growth rate among the regions (3.1%).
  • Among the largest 50 metros, only eight saw their median list price decline, led by San Antonio (-2.8%), Memphis, Tenn. (-2.1%), and Houston (-1.5%).
  • Nationally, the share of homes with price reductions decreased from 20.2% in September of last year to 17.8% this year and remains below 2017-2019 levels on average.

Fourteen of the 50 large metros saw the share of price reductions increase compared to last September, predominantly in the South and Midwest. Memphis, Tenn., saw the greatest increase (+6.0 percentage points), followed by Indianapolis (+4.4), and San Antonio (+3.4).

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