What's Happening?
The U.S. housing market is witnessing a significant contraction in available inventory, marking the steepest decline in over two years. According to Redfin, active listings fell by 1.4% from October, reaching approximately 1.95 million properties. This decrease is the largest seasonally adjusted drop since June 2023. New market listings also saw a decline, dropping 2.2% month over month to 527,000, the lowest since mid-2024. The hesitancy among home buyers is mirrored by sellers, who are reluctant to list their properties due to high home prices and the need to secure a certain amount to afford their next purchase. This situation has led to a decrease in total listing volume and prices, with the typical home selling for 1.6% below its final
list price in November, the largest pullback for the month in six years.
Why It's Important?
The current dynamics in the housing market have significant implications for both buyers and sellers. With fewer homes available, the remaining buyers have more leverage to negotiate price cuts and other incentives. However, the overall market slowdown could impact economic activity related to real estate, such as construction and home improvement industries. Sellers who purchased homes in the last two to three years may face the prospect of selling at a loss, particularly in certain metropolitan areas. This hesitancy to sell could further exacerbate the inventory shortage, affecting housing affordability and mobility for potential buyers.
What's Next?
As the market adjusts, some sellers may choose to delist their properties, hoping for better conditions in the spring buying season. This seasonal pattern could lead to a temporary stabilization in inventory levels. Real estate platforms like Zillow anticipate an improvement in housing turnover early next year, which could provide some relief to the current market stagnation. However, the ongoing economic conditions and interest rates will play a crucial role in shaping future market trends.
