Housing Inventory on the Rise as Interest Rates Hike in the United States

Housing markets in the US are experiencing significant disruptions due to interest rate hikes by the Federal Reserve. As a result, available housing inventory is increasing, causing several changes in demand and prices of homes for sale. Based on a list of American cities with populations of 200,000 or more, 119 housing markets were analyzed for the change in their available housing inventory year-over-year.

The Majority of Cities in the West and South have Experienced a Rise in Available Housing Inventory

According to recent data, the majority of cities that have experienced the largest one-year increase in housing inventory are located in the US West and South regions. Aurora, Colorado has recorded the greatest one-year growth among all cities analyzed, with a 115.6% increase in available homes for sale for the period from March 2022 to February 2023. Other cities that have also experienced a significant rise in housing inventory over the past year include North Las Vegas, Nevada; Gilbert and Mesa, Arizona; Spokane, Washington; and Spring Valley, Nevada.

Increasing Housing Inventory Correlates with Drops in Prices and Days on Market

There are notable correlations between cities that have experienced large one-year increases in inventory and other housing data, such as price drops and median number of days on the market before a home is sold. Significant correlation has been observed between available inventory levels and changes in demand and prices for homes.

Affordable Regions Lead Recovery

Recent data also shows that pending home sales grew for the third consecutive month in February in the United States. Pending home sales improved by 0.8% to 83.2 during this period according to data by the National Association of REALTORS®. All four regions saw year-over-year decreases in transactions but three regions posted monthly gains while the West declined.

Moreover, existing-home sales, pending contracts, and new-home construction pending contracts have turned the corner and climbed over the past few months. The Midwest and the South are leading the recovery in affordable US regions. Mortgage rates have also been improving after the federal government guaranteed the status of most mortgages.

Concerns over Access to Commercial Mortgage Loans

While residential mortgage loans are expected to be more readily available, access to commercial mortgage loans could become increasingly difficult. This will ultimately increase competition for available funding and push up prices in some markets.

Pending contracts are good early indicators of upcoming sales closings. The next Pending Home Sales Index is set to be released on April 27, 2023. Housing experts will closely monitor it to gain insights on how ongoing changes in interest rates will impact the selling and buying of homes in the United States moving forward.

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