The U.S. housing market offered homebuyers greater bargaining power in January, as mortgage rates fell to their lowest level in months, inventory rose, and the growth in the typical asking price continued to slow, according to the latest Realtor.com [1] Monthly Housing Trends Report [2].
Meanwhile, the annual decline in new listings also moderated to single digits in January; new listings remain an important indicator of home selling interest, and a sustained improvement would suggest more sellers are returning to the market in the coming months.
"Home buying in January remained relatively sluggish as sales slowed, inventories rose, and price growth leveled off. These trends reinforce that while buyers are gaining an advantage in the market, they are still being deterred by high home prices and financing costs," said Danielle Hale, Chief Economist for Realtor.com. "Even as inventories climb and prices moderate, homeowners have equity and advantages in the market but need to set their expectations accordingly. For renters looking to become homeowners this year our Best Markets for First-Time Homebuyers [3] identified pockets of affordability across the country, particularly in the northeast, where they might be able to better overcome affordability challenges and find a better deal."
Spotlight On: Affordable metros in the Midwest and Northeast gain in popularity
The Realtor.com [4] Q4 Cross-Market Demand Report [5]also released today highlights regional variations in home buying activity and shows that in the face of higher affordability challenges more home buyers are on the move this year. Across the top 100 metros in Q4 2022, 55.5% of listing views on Realtor.com went to properties located outside of the shoppers' metro area, compared to 55.0% during the previous quarter and 53.4% in the same time last year. Regionally, shoppers in the West (63.0%) and Northeast (57.0%) were mostly likely to search out-of-market last quarter.
Markets in the Midwest and Northeast that can offer shoppers more affordable deals gained the most popularity from out-of-market shoppers last quarter, including Pittsburgh; Buffalo, N.Y.; Syracuse, N.Y.; Albany, N.Y.; and Cleveland, Ohio. Markets that saw the greatest decline in out-of-market home shoppers were Austin, Texas; Seattle; Knoxville, Tenn.; Albuquerque, N.M.; and Ogden, Utah. High financial costs likely made Phoenix and Los Angeles less desirable destinations for both local and out-of-metro home shoppers last quarter compared to the prior year, which aligns with Realtor.com [6]'s 2023 Housing Forecast [7], which predicted large year-over-years sales declines in those two metros.
Gradually cooling markets gives buyers more homes to choose from
Nationally, the number of active listings in January continued to climb higher, suggesting that less competition and more time to make home buying decisions weren't enough to spur buyer demand in the face of high mortgage rates and home prices. Pending listings, or homes under contract with a buyer, continued to drop, as did the number of newly listed homes. This month's decline in new listings is the smallest since last July, and the South saw an increase in new listings, which means more, fresh for-sale options for homebuyers.
- In January, the active inventory of homes for sale grew 65.5% year-over-year in, but is still 43.2% lower than it was before the pandemic (January 2017-2019 average).
- Both pending listings, or homes under contract with a buyer (-31.9%), and newly-listed homes (-5.4%), declined year-over-year. The decline in new listings is much lower than last month's 21.0% decrease and November's 17.2% decrease and the smallest decline since last July's 6.8% decrease.
- Among the 50 largest U.S. metros, 49 markets posted yearly active inventory gains in January, led by Nashville, Tenn. (+303.5%), Austin, Texas (+260.4) and Raleigh, N.C. (+254.8%). The only metro to see inventory decline on a year-over-year basis was Hartford, Conn. (-8.0%).
- On average across the 50 largest metros, only the South saw year-over-year new listings increase in January (+5.4%). Twelve metros saw the number of newly listed homes increase compared to last year, up from only two markets in December, all of these markets were located in the South, with Raleigh, N.C. (+49.0%), Nashville, Tenn. (+45.3%), and Austin, Texas (+24.9%) seeing the greatest increases.
Buyers see slower price growth and have more time for decision making on a purchase
In January, the U.S. median listing price remained unchanged from December. Growth in the typical asking price (+8.1% year over year) also remained little changed from last month, after six months of decelerating price growth, suggesting a potential slowdown in the normalization of prices that could continue as we head further into 2023. As the number of homes for sale continues to rise, sellers were more than twice as likely as last year to reduce the asking price for their home. Homes also spent more time on market than last year, with homes in western metros spending 12 days more on the market compared to pre-pandemic times, but in all other regions homes are still selling more quickly than 2017–2019, on average.
- The U.S. median listing price was $400,000 in January, up 8.1% year-over-year, which is only a slight change from the December growth rate.
- The share of homes with price reductions increased from 6.0% in January 2022 to 15.3% this year. This is generally higher than it was before the pandemic, but is still slightly lower than 2019 levels (15.6%).
- The typical home spent 75 days on the market in January, 13 days longer than last year, but still 16 days faster than 2017–2019, on average.
- Across the 50 largest U.S. metros, 45 metros saw an increase in time on market compared to the same time last year, with the greatest increases seen in Raleigh, N.C. (+41 days), Las Vegas and Denver (+40 days, respectively). Only three markets saw shrinking time on market, including Richmond, Va. (-20 days), Milwaukee (-8 days), and Buffalo, N.Y. (-3 days).
To read the full report, including more data, charts and methodology, click here [1].