Altos Research Predicts a 40% Surge in Housing Inventory This Year

In a surprising twist to last fall’s expectations, the real estate market might see a significant increase in housing inventory, contrary to the anticipated decrease due to falling mortgage rates. Contrary to popular belief that lower rates would unleash a wave of pent-up sellers into the market, the reality shaping up is quite different.

Last year, the assumption was that mortgage rates dropping to the low 6s or even 5s would catalyze a surge in inventory as sellers who were holding off would finally decide to list their homes. The fear was an oversupply in the market, potentially driving down home prices. However, the unfolding scenario suggests an increase in inventory is more likely tied to rising mortgage rates rather than a decrease.

Inventory Trends and Predictions

• The current trajectory shows a consistent rise in housing inventory alongside increasing mortgage rates over the past two years.
• Presently, the U.S. market has over 500,000 single-family homes listed for sale, marking a 21% increase from the previous year and adding 100,000 more homes to the market since last March.
• If mortgage rates maintain their current levels or rise, projections indicate a 40% increase in available homes on the market by July compared to the previous year.

Regional Variations and Market Dynamics

• Gulf markets, stretching from Southwest Florida to Louisiana, are witnessing inventory levels surpassing pre-pandemic figures, contrasting sharply with the Northeast and parts of the Midwest, where inventory growth is just beginning to rebound from pandemic lows.

Implications for Home Prices and Market Activity

• With a higher inventory and reduced demand, the upward pressure on home prices seen in previous years is diminishing, leading to a more stabilized or flat home price appreciation in 2024.
• The median price for single-family homes in the U.S. currently stands at $432,000, showing a modest increase from last year, indicating a market adjusting to the new inventory levels without significant price drops.

Looking Ahead

As the market adjusts to these changes, both buyers and sellers will need to stay informed and adapt their strategies accordingly. The increase in inventory offers more options for buyers, while sellers may need to recalibrate their expectations and pricing strategies in a more competitive market.