Property Listings Are Starting to Rise: What Home Buyers Need to Know

Housing inventory has been sorely lacking. Are things starting to change for the better?

For well over a year now, the housing market has been challenging due to a glaring lack of inventory. At the same time, low mortgage rates have created an uptick in buyer demand, so much so that home prices have reached record-high levels this year.

That, of course, is great for sellers. But for buyers, it's been a tough road. A lot of buyers are finding themselves priced out of neighborhoods that would normally be within their reach, and until housing inventory improves substantially, property values are likely to remain inflated.

The good news is that there are finally signs that inventory is beginning to increase. The bad news, however, is that the market still has a ways to go before home prices are likely to drop significantly.

Inventory is coming back, slowly but surely

For the four-week period ending July 4, new home listings increased 4% compared to the same period one year prior, according to Redfin. And new listings were also up 3% from the same time period in 2019. That's the first time new supply has exceeded pre-pandemic levels.

But let's be clear -- a listing shortage is still very much upon us. In fact, the number of active property listings is down 32% from a year ago. And while listings are now up 8% from their 2021 low in early March, buyers are apt to continue facing challenges as they attempt to navigate this very tight market.

Not only are homes being listed at higher prices, but bidding wars are driving those prices up even more. In June, 55% of homes sold above their asking prices, up from 27% the year before.

Should you buy a home today?

If you've been struggling to find an affordable home in today's market, you may want to think about putting your search on pause. In recent weeks, property listings have increased. If that trend continues and more homes start hitting the market, it could be enough to ease competition to the point where prices start to come down toward pre-pandemic levels, when they were more affordable.

However, the one argument in favor of buying now is that mortgage rates are still extremely competitive. Some buyers fear that if they wait too long to purchase a home, they'll lose out on the opportunity to lock in affordable financing.

But in reality, mortgage rates aren't likely to climb anytime soon, and there's a strong chance they'll stay low through the end of 2022. This doesn't mean they won't rise slightly from where they're sitting today, but even so, they would still be considered affordable rates on a historical basis.

As such, don't let your fear of losing out on today's mortgage rates push you to buy a home in the current market if that's something you're struggling with. Stretching your budget and overpaying for a home could leave you cash strapped for many years as you grapple with your new homeownership costs. And that could, in turn, put you at risk of losing your home.

There's nothing wrong with continuing to look at listings -- but you may want to do so casually rather than give your house hunt your all. If inventory continues to get added, you may have a much easier time finding a home as early as later this year.