Lower mortgage rates have drawn out more buyers this fall, but the rapidly shrinking inventory of lower-cost homes—the properties highest in demand—are making it difficult for them to find a home to buy, a new report from realtor.com® shows. This has created more competition between first-time buyers and move-up buyers.
Nationwide, inventory levels continue to shrink. In September, inventory levels were 2.5% lower than a year ago, marking a faster rate of decline compared to August, realtor.com® reports. Mid-market homes—those priced between $200,000 to $750,000, which make up the largest segment of housing inventory—showed zero percent of growth in September. That price point is likely poised for its first decline next month, researchers warn.
"The mid-tier of housing represents nearly 60 percent of homes for sale on the market, making it a solid indicator of how tight inventory levels are in the U.S.,” says George Ratiu, senior economist for realtor.com®. “After more than a year and a half of solid growth in this segment, we're seeing inventory levels stall out and flat-line. If, or better yet, when inventory in this segment begins to take a downturn, the vast majority of homebuyers are going to feel its effects as their options rapidly dwindle.”
Further, homes available under $200,000—the entry-level tier--have decreased 10% over the last year.
Meanwhile, homes listed for sale over $750,000 continued to grow, in September reaching 4.7 percent over levels from a year ago. However, realtor.com® economists note that if strong homebuying demand, fueled by lower interest rates, continues to persist into the fall, the inventory of homes in this upper-tier price range also could see declines by February of the coming year.
"Buyers looking for their next home have faced the headwinds of tight inventory and a competitive market this year,” says Ratiu. “While lower mortgage rates and the arrival of fall promised a reprieve, conditions continue to tighten as demand remains strong. September inventory trends, especially in the mid-market, may be the canary in the coal mine that we could be headed for even lower levels of inventory in early 2020.”
The median list price nationwide in September was $305,000, up 4.3% over last year. Nationally, homes sold in an average of 65 days in September, one day slower than a year ago.