Housing inventory is picking up. So why is the lead still lagging?

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Think of the real estate market as a grocery store.

In this metaphor, over the past few years, there have been few products to choose from and very little inventory on the shelves. This is the real estate version of the typical Soviet supermarket – rather depressing.

But recently, something started to change.

“We’re seeing supermarket shelves starting to be restocked,” Realtor.com senior economist Ralph McLaughlin recently told Intel. “They’re not as stocked as they were before the pandemic, but they’re on the way.”

In other words, the U.S. housing inventory situation is improving. This is good news. But for various reasons, the market is actually very complex. So far, 2024 has not been a boom time.

To better understand what’s going on, Intel spoke with economists and surveyed hundreds of agent and brokerage leaders in late June as part of the Inman Intel Index survey.

The result of these efforts is a double-edged sword: On the one hand, there is more inventory on the market now than there was a year ago. But on the other hand, inventories are still well below pre-pandemic levels and demand remains suppressed.

The result is that agencies have become heavily reliant on existing areas to navigate a market that remains challenging.

Inventory is improving

Experts who interviewed Intel for this article agreed that overall inventories are improving.

• Redfin chief economist Daryl Fairweather recently told Intel that “inventory is the highest it has been this time of year in at least the last four years.” She added, “We only have about three months of inventory.”
• McLaughlin said inventory improvements have been most significant in the South, where home construction is strongest. “Supermarkets out there are close to being fully stocked compared to pre-pandemic levels, and stock prices are quite reasonable,” he said.

But the trend of improving inventories isn’t limited to the South.

• Mike Simonsen, founder and president of Altos Research, told Intel, “Available inventory of unsold homes is climbing almost everywhere across the country. Every state now has more inventory than it did this time last year.

The data backs this up, showing a steady climb in the number of active listings.

Image source: Realtor.com data, visualized by Intel

• Realtor.com data shows increase in homes for sale 37% June compared to the same period last year. Meanwhile, the seller lists 6% There are more houses in June than in May. The search portal’s June housing trends report ultimately concluded that “the market stabilized as mortgage rates also stabilized in June.”
• That upward trend has been going on for longer, according to Realtor.com data. The number of active listings rose rapidly to 839,992 June, that is 70% More than what was on the market in the same month of 2021.
• Data from the National Association of Realtors paints a similar picture, showing that as of May, 3.7 months Inventory in the U.S. housing market. This is up from lows of approximately 1.6 months Inventory for early 2022.

So if there are more homes on the market, where does the revenue come from?

Looking at just a few months of inventory or active listings might give the impression that the U.S. housing market has bounced back to life after years of slump. The well-known supermarket appears to be stocked and ready.

But anyone who works in real estate knows it’s not that simple. Part of what’s going on has to do with Why Active listings are actually increasing.

• Fairweather explains new Compared with 2023, the number of listings has increased, but “Only 10% reduction”. They remain below 2021 and 2022 levels. “More importantly, the homes coming onto the market are Stay on the market longer We’re seeing them starting to sell for less than list price,” Fairweather explained.

Image source: Realtor.com data, visualized by Intel

This means inventories are rising less from new supply (although this is slowly happening) and more from weak demand.

• “As mortgage rates go higher, that slows demand, which leads to increased inventory,” Simonson said. Other factors dampening demand include fewer people changing jobs and therefore relocating, and fewer new jobs being created, he added. “Looking at the employment data, there aren’t a lot of layoffs, but there aren’t a lot of hirings either.”
• Optimal Blue data shows the average interest rate on a 30-year fixed-rate mortgage peaked last fall at just under 8%but has since fallen to highs 6% Range – The numbers could explain both the small rise in new listings and the softening in demand. Financing remains expensive for many consumers, so homes are stuck on the market and inventory is rising.
• On top of that, inventory may be rising, but data from Realtor.com shows active listings in June were still around twenty three% That’s below the pre-pandemic June average from 2017 to 2019. As a result, housing supply remains tight by historical standards.

What’s happening is that inventory conditions have improved and it may be easier for buyers to find homes they like, but they still have difficulty purchasing those homes because of the high cost.

The situation also stands in stark contrast to the pandemic period. Inventory was also an issue at the time, but in this case it was because demand was high and outpacing supply growth.

So what do agents and brokers do about all this?

Respondents to the June Inman Intel Index survey do appear to be feeling the effects of the market continuing to struggle with supply and demand balance.

• Among agency respondents surveyed, 27% said their pipes are “much lighter” than a year ago. other 30% Describing the pipeline as simply “lighter” – meaning more than half of agents experienced a weakening of the pipeline in the past year.
• in total, twenty four% of agency respondents said insufficient inventory is their biggest concern right now. This ties into agents’ second biggest concern, commission compression. Mortgage rates are closely tied to inventory and are the most common top question, 29% Agent responds.
• Of the brokers surveyed, approx. 19% calls inventory their biggest concern — second only to commission lawsuits 25%.
• Likewise, of the more than 6,000 real estate agents who responded to the NAR 2024 Member Profile Survey last week, 26% Point out that inventory is one of the top two issues holding back customers. Only affordability, which like rates is closely tied to inventory, was cited as a stumbling block for customers.

The point is, agents are feeling the challenges of the current market — high interest rates, low demand and still-low inventory. According to the survey, the most common response seemed to be for agents to go the extra mile:

• More than a quarter of proxy respondents participated in the survey, or 28%, stating that “almost all” of their recent listings have come from repeat customers. This eclipses all other answers to this question.
• other 15% means that more than 75% of listings come from repeat customers, while twenty three% revealed that half to three-quarters of their merchandise comes from repeat customers. All in all, this means nearly two-thirds of agents get half or more of their listings from repeat clients.
• When agents were asked how their agents should source new listings, multiple respondents or 28%select “Other” and then provide free responses, many of which focus on domain building:
  • “Keep in touch with previous customers”
  • “Access to existing home equity”
  • “Recommend and Repeat”
• A large proportion of agent respondents also stated that their agent should focus on social media or SEO, e.g. 25%then direct mailers 18%.

The argument that emerges is that in a still depressed market, agents and brokers alike view existing connections with industry professionals as a better resource than a host of other activities such as open houses, paid advertising or buying leads – all of which The campaign received fewer responses in the survey.

The survey also offers a glimmer of hope, likely in response to the numbers at the beginning of this article, suggesting that inventories are at least on the mend.

• Multiple proxy respondents participate in the survey, or 43%said they believe the IPO pipeline a year from now will be roughly the same as it is now.
• other 35% Believe that their listing pipeline will become more onerous in a year. At the same time, only twenty two% Thought their pipes would be lighter.
• All of this suggests that agents believe the future will be at least as good as the present, and many believe it will be better.

Email Jim Dalrymple II