Mortgage monitor: Housing inventory hits two-year high as prices cool

Improved supply meets softening demand in higher rate environment

Mortgage monitor: Housing inventory hits two-year high as prices cool

The number of homes for sale has continued to improve on the back of softer purchase demand, as inventory hit its highest level since mid-2020, according to the latest ICE Home Price Index data.

Annual home price gains continued to cool, marking the second consecutive month of pullbacks. Prices rose 5.1% year-over-year in April, down from a revised 5.7% increase in March and 6.1% in February.

Andy Walden, ICE’s vice president of enterprise research strategy, explained that this cooling trend is evident in both seasonally adjusted and unadjusted figures.

“Softening price growth in April has dropped us below the long-run average,” Walden said in the report. “We’ve seen the rate of appreciation slow on an adjusted level as well, suggesting annual growth will likely continue to slow in coming months.”

The Mortgage Monitor report indicated that if adjusted monthly gains continue at the current pace of 0.28% per month, the annual growth rate could fall below 4.25% in June, with year-over-year gains dropping to less than 4% by July. Despite this, both supply and demand remain constrained in the housing market, and interest rate movements can significantly impact prices.

The number of homes for sale nationwide increased by 30% year over year in April. This improvement is particularly noticeable in Florida and Texas, where 13 of the largest markets have seen inventory return to pre-pandemic levels.

However, inventory deficits persisted in many northeastern and midwestern markets, keeping upward pressure on home prices in those areas.

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“Inventory seems to be the primary differentiator when it comes to the bifurcation we’re seeing in housing market temperatures across the country,” Walden noted.

“While we’ve made meaningful strides in terms of inventory improvement, there are still roughly 36% fewer listings than normal for this time of year. Likewise, in the face of higher rates as well as prices, purchase mortgage demand remains about 45% off comparable periods in 2018 and 2019.”

Walden cautioned that interest rate fluctuations could significantly impact prices.

“As we’ve seen in recent years, any substantial move in rates can result in those supply/demand dynamics shifting quickly, either bolstering or softening home prices,” he said.

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