Affordable homes sprouting more quickly as spring approaches 

Thanks to warming in the South, the spring thaw in the housing market is shaping up to be the best since the start of the pandemic, according to Realtor.com's February Housing Report.

"The first couple of months of 2024 have proven to be positive for inventory levels, as the number of homes actively for sale was at its highest level since 2020," said Realtor.com Chief Economist Danielle Hale.

A typical day last month saw 14.8% more homes actively for sale than the same time last year, making February the fourth consecutive month of year-over-year inventory growth.

That's not to say the market is booming. But any improvement is a relief for the industry that saw rising mortgage rates crush both supply and demand for homes last year. And it helps that the biggest growth category was affordable homes.

"While the country is still well below pre-pandemic levels, the South is leading the charge, moving faster than other parts of the country, largely driving the (20.6%) increase in availability of homes priced between $200,000 and $350,000, a price category that saw the most year-over-year growth nationally," Hale said.

Inventory up, days on market down

In the 50 largest metros, inventory increased 7.6% compared with February of last year but is still 36.7% below pre-pandemic levels. Large Southern metros drove the rise in active listings, while large Western and Northeastern metros saw inventory declines .

Despite a growth in inventory, the typical home spent 61 days on the market this February, down four days compared to a year ago.

"For the last few years, housing inventory has been so limited that the norm seemed to be, 'If you list it, it will sell,'" Hale said. "Sellers were very firmly in the driver's seat."

In the 50 largest metropolitan areas, the typical home spent 48 days on the market, five days less than last February. Large metros in the West saw the greatest improvement, with 10 fewer days on the market year-over-year.

Higher interest rates still a drag — but not for everyone

The report suggests that at least some consumers may be ready to shrug off higher borrowing costs. 

Rates declined at the end of 2023 but before flirting with 7% recently. But that didn't slow the growth in listings, perhaps indicating that at least some consumers are done waiting for a return to interest rates of yore.

"There are still plenty of holdouts waiting for lower mortgage rates, but the pickup in inventory suggests that one of the biggest roadblocks for home shoppers in recent years — a lack of homes for sale — is not going to be a big of a challenge this year," said Hale.

"That's not to say that everything is back to where it should be, but the improvement is enough that we've hit an important milestone to start the year, namely, more homes on the market than any year since 2020."

Nationally, new listings increased 11.3% compared to a year ago, despite interest rates that were higher than the previous February. In the 50 largest metro areas, newly listed homes increased by 9.5%, with 44 metros seeing a new listings increase over the previous year. 

The metros showing the biggest hike in new listings vs. 2023 were Seattle (up 41.7%), Minneapolis (up 37.4%) and Tampa (up 25.3%). On the other end of the spectrum were Milwaukee (down 19.1%), Hartford (down 6.3%) and New York (down 3.1%) .

Regionally, new listings increased by 12.4% in the South, 11.1% in the West, 7.7% in the Midwest and 2.0% in the Northeast.

On the less optimistic side, pending sales — homes under contract but not yet closed — dropped by 0.8% compared to last year, perhaps flashing a warning sign that higher mortgage rates aren't finished wreaking havoc on the housing market.

Price reductions growing, along with costs

With more inventory came more price reductions, according to the report. The share of homes with lowered prices increased to 14.6% last month, compared to 13.2% in February of 2023. That's the first increase in that number since last May.

"I'm watching to see how the increase in listings and mortgage rate path affect market balance," Hale said. "Asking prices don't have as much momentum this spring, and we are tracking an uptick in price cuts from sellers, suggesting somewhat more market power for buyers."

Meanwhile, home prices continue to rise, but not as fast. The national median list price rose slightly to $415,500 in February compared to $409,500 in January. Year-over-year, prices were relatively stable, growing just 0.3%.

But the real cost to homebuyers is higher when increased mortgage rates are factored in. The monthly mortgage on a typical home with a 20% down payment rose 5.4% for the year, not including tax and insurance.

"It's likely that the uptick in mortgage rates seen in the last few weeks has cut into some buyers' plans, giving those buyers still in the market an advantage," Hale said. "Whether that advantage lasts or not depends on mortgage rates."

If the trend of price deceleration continues, the Realtor.com report predicts the median home price will drop below 2023 levels this month.

"While the cost to purchase a home is still growing, at least the rate of growth has slowed," the report states.