Good News for Home Sellers: Lower Mortgage Rates Reignite Buyer Demand This Spring

Month’s Supply in 50 Largest Markets Decreases for First time in 11 Month

  • In February, the pace of home sales relative to inventory increased for the first time since March of last year. Despite rising home prices and constricted affordability, recent drops in mortgage rates have boosted buyer demand and enabled some reacceleration in the market.
  • This spring should still see a slower home-buying season compared to last year. Realtor.com’s months supply 50-market composite decreased to 4.35 months, down 5% over the previous month, but still up 8% over this time last year.
  • Locally, 35 of the 50 largest metros in the country are now cooling down on a yearly basis, but only 8 of the 50 are cooling down compared to January.
  • The top 5 cooling markets compared to last February are: San Jose, CA; Seattle, WA; Omaha, NE; Portland, OR and Dallas, TX, with month’s supply up 48% y/y on average.
  • The top 5 reignited markets compared to last February are: Indianapolis, IN; Oklahoma City, OK; Albuquerque, NM; Pittsburgh, PA and Virginia Beach, VA, with month’s supply up 14% y/y on average.

This month’s month supply data shows a visible shift in the buyer-seller dynamic, and confirms earlier hints of reacceleration. In February, the pace of home sales relative to inventory increased for the first time in 11 months. Realtor.com’s month’s supply, which measures the speed of the market by looking at the ratio of active listings to closings, reached 4.35 months in the 50 largest markets combined, a 5% decrease over January, and an 8% increase over last February (a higher month’s supply figure indicates a slower, more buyer-friendly market). Locally, 35 of 50 markets are slowing down on a yearly basis, but only 8 of 50 are doing so on a monthly basis. Lower mortgage rates have effectively improved affordability in some markets, boosting sales and causing the overall rate of absorption to reaccelerate after 11 months of declines. The switch in trajectory means this home buying season could be more active than anticipated, yet still slower than last year’s. Further rate drops in March will open the door for further tightening in the market, and it will be interesting to see if movement is sustained enough to change the otherwise cooling pattern.

Buyer’s Market, Seller’s Market, or Balanced?

Realtor.com’s month’s supply measures the speed of the market by looking at the ratio of active listings relative to the number of home sales. The ratio is adjusted seasonally so markets can be tracked on a monthly basis. A balanced market typically equates to 6-7 months supply; while a buyer’s market equates 7 months supply and above; and a seller’s market equates to 6 months supply and under. 

Coolest markets compared to last February: Month’s supply in 35 of the 50 markets is now above last February levels. The top 5 cooler markets compared to last spring include: San Jose, CA; Seattle, WA; Omaha, NE; Portland, OR and Dallas, TX. The pace of absorption in these previously boiling markets is up 48% y/y and 6% m/m respectively on average. These rapidly cooling markets are also emerging from seller-friendly conditions and still average a relatively low 3.3 month’s supply.

Fastest cooling markets compared to last month: Despite the boost in demand from lower rates, some markets are still moving toward cooler conditions. The top 5 fastest cooling markets compared to last month include: Albuquerque, NM; Jacksonville, FL; Louisville, KY; Washington, DC; and Omaha, NE. The pace of absorption is slowing in these previously hot markets, with month’s supply up 11% y/y and 4% m/m respectively on average.

Hotter Compared to last February: Month’s supply in 15 of 50 markets is now below last year levels. The top 5 markets heating up the fastest on a yearly basis are: Indianapolis, IN; Oklahoma City, OK; Albuquerque, NM; Pittsburgh, PA; and Virginia Beach, VA, down 14% y/y and 5% m/m. However, these top 5 rapidly heating markets also are coming from seller-friendly conditions and average 4.7 month’s supply.

Hotter compared to last month: The top 5 markets heating up the fastest compared to last month include: Grand Rapids, MI; Boston, MA; Worcester, MA; Indianapolis, IN; and Raleigh, NC.  The pace of absorption is accelerating in these hot markets, with month’s supply down 7 % y/y and 20% m/m respectively on average.

Four year movers: More markets continue to slow to more balanced conditions found in the market four years ago. Month’s supply in 29 of 50 metros is now above February 2015 levels. In particular, California and Texas have seen have seen a considerable slowdown. The top 5 cooling markets relative to 2015 baselines are: San Jose, CA; Seattle, WA; Omaha, NE; Portland, OR; and Dallas, TX.

Metro
February 2019 Months Supply
M/M
Y/Y
Albany-Schenectady-Troy, NY                 6.9 -1% 1%
Albuquerque, NM                 4.4 6% -14%
Austin-Round Rock, TX                 4.2 -11% 8%
Baltimore-Columbia-Towson, MD                 5.1 2% 2%
Birmingham-Hoover, AL                 4.1 -2% -9%
Boston-Cambridge-Newton, MA-NH                 3.5 -19% 7%
Buffalo-Cheektowaga et al, NY                 2.7 1% 2%
Chicago et al, IL-IN-WI                 7.6 -2% 27%
Cincinnati, OH-KY-IN                 3.0 0% -5%
Cleveland-Elyria, OH                 4.4 1% -6%
Dallas-Fort Worth-Arlington, TX                 4.9 -4% 33%
Detroit-Warren-Dearborn, MI                 4.2 0% 29%
Grand Rapids-Wyoming, MI                 2.1 -32% -3%
Houston-The Woodlands et al, TX                 6.7 -3% 28%
Indianapolis-Carmel-Anderson, IN                 2.7 -17% -20%
Jacksonville, FL                 5.8 5% 18%
Kansas City, MO-KS                 5.6 -5% 28%
Las Vegas-Henderson-Paradise, NV                 3.6 -5% 8%
Los Angeles-Long Beach et al, CA                 5.0 -4% 27%
Louisville et al, KY-IN                 3.7 3% 17%
Memphis, TN-MS-AR                 3.9 -11% -9%
Miami-Fort Lauderdale et al, FL                 8.6 -1% 8%
Milwaukee-Waukesha et al, WI                 4.0 -6% 13%
Minneapolis et al, MN-WI                 2.9 -11% -4%
Nashville-Davidson et al, TN                 4.3 -6% 26%
New Orleans-Metairie, LA                 5.7 -11% -4%
Oklahoma City, OK                 4.1 -6% -14%
Omaha-Council Bluffs, NE-IA                 3.0 2% 37%
Orlando-Kissimmee-Sanford, FL                 3.6 -4% 11%
Philadelphia et al, PA-NJ-DE-MD                 5.5 -6% 9%
Phoenix-Mesa-Scottsdale, AZ                 3.4 -7% 11%
Pittsburgh, PA                 5.9 -1% -11%
Portland-Vancouver et al, OR-WA                 3.6 -6% 35%
Providence-Warwick, RI-MA                 5.1 -3% 13%
Raleigh, NC                 3.3 -17% -9%
Richmond, VA                 3.8 -1% 17%
Riverside et al, CA                 5.3 -9% 19%
Rochester, NY                 4.1 -6% 9%
Salt Lake City, UT                 3.5 -1% 28%
San Antonio-New Braunfels, TX                 5.5 -6% 2%
San Diego-Carlsbad, CA                 4.0 -16% 33%
San Francisco-Oakland et al, CA                 2.9 -4% 33%
San Jose-Sunnyvale et al, CA                 2.8 -11% 85%
Seattle-Tacoma-Bellevue, WA                 2.3 -10% 48%
Tampa-St. Petersburg et al, FL                 4.2 -2% 11%
Tucson, AZ                 3.1 -5% 2%
Tulsa, OK                 5.2 -3% 1%
Virginia Beach et al, VA-NC                 6.5 -4% -10%
Washington et al, DC-VA-MD-WV                 3.8 2% -1%
Worcester, MA-CT                 3.5 -17% -10%

*Realtor.com’s 50-market month supply composite is an index based on sales for each market in a given period. The following markets were excluded from rankings this month as we review their data: New York; Atlanta; St. Louis; Denver; Charlotte; Sacramento; Columbus; Hartford.

Methodology: Analysis is based on realtor.com‘s seasonally adjusted month’s supply estimates for 50 of the largest metropolitan areas in the country. With data as of February 2019. Month’s supply measures the speed of the market by calculating the number of months it would take for inventory to deplete at the current pace of sales. Specifically, it is calculated as the ratio of active residential listings relative to the number of sales. The ratio is adjusted seasonally to remove variability during the year so markets can be tracked on a monthly basis. A balanced market typically equates to 6-7 months supply; while a buyer’s market equates 7 months supply and above; and a seller’s market equates to 6 months supply and under. Nationally, NAR reported months supply at 3.5 months in February, down 3% over last year.


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