Housing inventory hit its highest level since May 2020

Following 10 consecutive months of housing inventory growth, the number of U.S. homes actively for sale in August reached its highest level since May 2020, according to Realtor.com NWSA-0.25% data released Thursday.

There were nearly 36% more homes for sale on a typical day in August compared with the same period in 2023, the real estate site found. Total inventory — which sits at 909,344 units, according to the report — remains down 26% from typical 2017 to 2019 levels, prior to the COVID-19 pandemic. Still, the number of available units hasn’t been this high since May 2020, when there was an average of 928,370 homes for sale across the U.S.

At the same time, the median price of homes for sale in August fell by 1.3% from last year, to $429,990. Despite this price drop, and increased options for buyers, the housing market slowed considerably last month.

The typical home spent 53 days on the market in August — a week longer than it did during the same month last year. This suggests that buyers remain hesitant to take the plunge, and are holding out for better homes and sweeter deals.

Both home buyers and sellers pulled back last month, as the latter listed fewer new homes and the former appeared to sidelines themselves in anticipation of better conditions to come.

In particular, the slowdown in housing market activity comes as “both buyers and sellers patiently wait for a lower mortgage rate environment,” Realtor.com said.

Mortgage rates have declined for the fifth-consecutive week, in what should be a positive signal for homebuyers. The 30-year fixed rate mortgage dropped to 6.43% this week, according to data from the Mortgage Bankers Association.

But even these early signs of declining mortgage rates have done little to spur buyers — and sellers — into action, so far. Demand for mortgages has grown only slightly as inventory continues to pile up.

Affordability is a key issue for buyers, many of whom are now struggling to afford monthly housing payments. With mortgage rates set to continue their decline if the Federal Reserve lowers interest rates, activity could pick up once again in the housing market — which would then push prices up.