In signs that housing inventory is seeing meaningful recovery, active listings rose in July at a record annual pace — up 30.7% — for the third month in a row, according to the Realtor.com Monthly Housing Trends Report released on Tuesday.

Although buyers had more for-sale home options in July, competition remained largely in sellers’ favor, with listing prices near all-time highs and homes selling more quickly than before the pandemic.

“The U.S. housing market continues to move toward more evenly balanced supply and demand compared to the 2021 frenzy,” said Danielle Hale, chief economist for Realtor.com. “Our July data shows elevated mortgage rates left many buyers tightening their budgets and sellers responding with price reductions, while home shoppers who kept searching saw more available options.”

At the same time new listings declined in July, suggesting that some prospective sellers are wondering what recent market shifts mean for their plans to list.

“Data indicates that homeowners grappling with this decision are still in a good position in many markets, with buyer interest keeping well-priced homes selling quickly,” said Hale. “Plus, many sellers have a substantial equity cushion to leverage, thanks to the past decade of rising prices. Whether or not they take advantage of these opportunities will be key to inventory trends moving forward.”

Inventory recovery accelerates despite new seller setbacks

Between supply and demand trends, July data indicates that softening buyer interest is the bigger driver of accelerated inventory improvements. With typical monthly mortgage payments now 1.5 times higher than in July 2021, recent home sales data shows that many buyers are putting their plans on pause, which is giving active listings room to grow.

However, the shift in market conditions seems to be having the opposite effect on seller activity, with new listings declining for the first time since March. This suggests that some homeowners are reconsidering their plans to list in light of trends like declining numbers of homes under contract. Despite the new seller dip, active listings grew at a record-fast pace for the third straight month in July, further signaling a real estate refresh on the horizon for 2022 buyers.

• In July, the inventory of active listings increased 30.7% year-over-year, faster than ever before in Realtor.com’s data history, building on record-breaking paces in June (+18.7%) and in May (+8%). These continued improvements are partly due to ongoing annual declines in pending listings, which were bigger in July (-19.4%) than in June (-16.3%).
• Nationally, newly listed homes were down 2.8% compared to July 2021, with the biggest drops registered in the Northeast (-14.3%) and Midwest (-11.0%). With Northern regions less equipped for scorching temperatures, these trends suggest that recent record-breaking heat waves may also have played a role in July’s new seller pullback.
• Relative to the national rate, active inventory grew at a faster annual pace (+41.0%) across the 50 largest U.S. metros in July, on average. Forty-five markets posted active listings gains, led by Phoenix (+158.7%), Austin, Texas (+154.5%) and Raleigh, North Carolina. (+137.5%).
• More new sellers entered the market than last year in 13 of the biggest metros, with new listings jumping most significantly in Las Vegas (+37.6%), Nashville (+37.1%) and Oklahoma City (+28.6%).

Buyer competition remains fierce, but shows early signs of cooling

July’s new listings setback suggests that some sellers may feel they have missed their opportunity to take advantage of favorable market conditions. On the one hand, the rise in available for-sale home options has resulted in a more buyer-friendly market relative to last year. Asking price growth overall and per square foot both continued to moderate in July, while the share of sellers making price reductions increased. On the other hand, competitive conditions remained largely in sellers’ favor in July, with home prices holding near all-time highs and time on market still significantly lower than pre-Covid levels.

• The U.S. median listing price came in just $1,000 shy of June’s all-time high in July ($449,000), up 16.6% year-over-year. On a square foot basis, year-over-year asking price growth moderated slightly in July (+15.5%) from the June pace (+16.2%).
• In early signs of potential softening demand for higher-priced homes, yearly growth in pending listing prices was smaller in July (+12.4%) than in June (+13.9%), marking the third consecutive month of deceleration. Additionally, 19.1% of homes had their price reduced in July, up from 9.4% in 2021 and surpassing the typical 2019 share (18.0%).
• Asking prices increased year-over-year in 47 of the 50 largest metros, led by Miami (+36.2%), Memphis (+32.7%), and Orlando, Florida. (+28.4%), and declined in just three markets: Rochester, New York (-3.1%), Pittsburgh (-3.1%) and Cincinnati (-2.9%).
• The typical home spent 35 days on the market in July, down two days year-over-year and 26 days from the 2017-2019 average. Time on market was fastest year-over-year in Miami (-16 days), Orlando (-6 days) and Tampa (-6 days).
• In 24 metros, time on market slowed from the July 2021 pace, most significantly in Austin (+11 days), Denver (+8 days) and Riverside, Calif. (+7 days).

Affordability crunch drives out-of-state demand from still-eager buyers

Between rising housing costs adding to demand for affordability and increased adoption of remote work policies enabling some Americans to relocate, multiple trends are motivating home shoppers to search farther from where they live. New research illustrates how rising buyer interest in relocating may be one contributing factor behind July’s still-hot competition for homes in many areas of the country, with key findings from Realtor.com’s second quarter Cross-Market Demand Report including:

• From April-June, 53% of listings views on Realtor.com came from users outside of the listing’s metro, up from 48% in the first quarter and a new all-time high.
• Regionally, the Northeast posted the biggest yearly increase in views from out-of-market users, up 6.8 percentage points to 45.9%. This could be a potential contributor to the Northeast’s July inventory trends, as its yearly increase in for-sale homes (+3.0%) was smaller than any other region (Midwest: +10.2%; South: +51.6%; West: +68.9%).
• Among the top 10 metros attracting out-of-market views, eight offered more affordable listing prices than the second quarter national median ($440,650), including El Paso, Texas ($281,642), where 62.1% of inbound listing viewers were from a different market.
• At the state level, 37% of home shopper views to listings came from out-of-state in the second quarter, higher than in the first quarter (36%) and the typical 2018 to 2020 share (29%). The fastest-growing destinations for out-of-state buyers year-over-year, by percentage points, were New Jersey (+12.7), Nebraska (+11.5) and Maryland (+11.3).

“Our analysis highlights how home shoppers are prioritizing affordability in the face of financial challenges, but also the variety of reasons that Americans are taking advantage of opportunities to relocate,” said Joel Berner, senior economic research analyst for Realtor.com.

He said, “People are eager to move to new areas offering relatively lower living expenses in the face of high inflation, more outdoor recreation, jobs in different cities, working for their old office from home in a new locale and more. As a result, we’ve seen Cross-Market Demand increase in every quarter since 2020 at the peak of pandemic lockdowns, a marked shift and one to keep an eye on as Americans progress further into the new normal.”