Housing Inventory Is Climbing Back. So Why Are Leads Still Lagging?

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Imagine the housing market as a grocery store.

In this metaphor, the pickings have been slim, the shelves poorly stocked for the last few years. It was the real estate version of a stereotypical Soviet supermarket — which is pretty depressing.

But lately, something has started to change.

“What we’re seeing is the supermarket shelves are starting to get restocked,” Realtor.com Senior Economist Ralph McLaughlin recently told Intel. “They’re not fully stocked like they were before the pandemic, but they’re on their way.”

In other words, the housing inventory situation in the U.S. is improving. This is good news. But for a variety of reasons, the market is actually complicated. So far, 2024 has hardly been a boom time.

To better understand what’s going on, Intel spoke to economists and polled hundreds of agents and brokerage leaders in late June as part of the Inman Intel Index survey.

The takeaway from these efforts is something of a two-edged sword: On the one hand, there’s more inventory on the market now than there was a year ago. But on the other, inventory is still far below pre-pandemic levels and demand remains suppressed.

The result is that agents have become heavily dependent on their existing spheres to cope with a market that’s still characterized by challenges.

Inventory is improving

Experts who spoke to Intel for this story agreed that overall inventory is improving.

• Redfin Chief Economist Daryl Fairweather recently told Intel that “inventory is the highest it’s been this time of year in at least the last four years.” She added that “we’re around three months of inventory.”
• McLaughlin said that inventory has improved most significantly in the South, where homebuilding has been strongest. “The supermarkets there are close to fully stocked compared to pre-pandemic levels, and their inventory is fairly priced,” he said.

But the trend of improving inventory is not limited to just the South.

• Altos Research founder and President Mike Simonsen told Intel that “available inventory of unsold homes is climbing pretty much everywhere across the country. Every state has more inventory now than last year at this time.”

The numbers bear this out, with data showing active listings steadily climbing.

• Realtor.com data shows that the number of active homes for sale was up 37 percent year over year in June. At the same time, homesellers listed 6 percent more homes in June compared to May. The search portals June housing trends report ultimately concludes that the “market stabilized as mortgage rates also stabilized in June.”
• Data from Realtor.com shows that the upward trend has been occurring over an even longer period. The number of active listings has risen rapidly to 839,992 in June, which is 70 percent more than were on the market in the same month in 2021.
• Data from the National Association of Realtors paints a similar picture, revealing that as of May there were 3.7 months of inventory in the U.S. housing market. That’s up from a low of about 1.6 months of inventory at the beginning of 2022.

So if there are more homes on the market, where’s the revenue?

Looking just at months of inventory or active listings might give the impression that after years of sluggishness, the U.S. housing market has come roaring back to life. The proverbial supermarket appears to be restocked and ready to go.

But anyone working in real estate knows it’s not that simple. And part of what’s going on has to do with why active listings are actually on the rise.

• Fairweather explained that new listings are up compared to 2023, but “only by 10 percent.” They’re also still lower than they were in 2021 and 2022. In other words, inventory isn’t rising because a lot of new homes are hitting the market. “It’s more that the homes that are hitting the market are staying on the market longer and we’re seeing them starting to sell for under list price,” Fairweather explained.

Credit: Realtor.com data, visualized by Intel

What this means is that inventory is rising less in response to new supply (though that is happening, slowly) and more in response to weak demand.

• “As mortgage rates moved higher, that has led to a demand slowdown that allows inventory to build,” Simonsen said. He added that other factors tamping down demand include fewer people changing jobs and thus relocating, and fewer new jobs being created. “With the employment numbers, there aren’t very many layoffs but there’s also not very many hires.”
• Optimal Blue data shows that average rates on a 30-year, fixed-rate mortgage peaked last fall at just under 8 percent, but have since fallen into the high 6 percent range — figures that explain both the modest uptick in new listings but also anemic demand. Loans remain expensive for many consumers, so homes sit on the market and inventory rises.
• On top of all of this, inventory may be rising, but Realtor.com data shows active listings in June were still about 23 percent below where they were during the average June from 2017-2019, right before the pandemic. So housing supply remains tight by historical standards.

The picture that emerges is one of an improving inventory situation where buyers may have an easier time finding homes they like, but where they still struggle to buy those homes due to high costs.

The situation also offers a stark contract to the pandemic years; inventory was also a problem then, but in that case it was because demand was high and outpaced supply growth.

So what are agents and brokers doing about all of this?

Respondents to Inman Intel Index survey in June do seem to be feeling the effects of a market that continues to struggle with a balance of supply and demand.

• Among agent respondents to the survey, 27 percent said their pipelines are “substantially lighter” than they were one year ago. Another 30 percent described pipelines as being merely “lighter” — meaning well over half of agents have experienced a weakening pipeline over the last year.
• In total, 24 percent of agent respondents pointed to lack of inventory as their top concern right now. That tied with commission compression for the second largest concern among agents. Mortgage rates — which have a strong relationship to inventory — were the most common top concern, garnering 29 percent of agent responses.
• Among brokers who took the survey, about 19 percent cited inventory as their top concern — second only to commission lawsuits in first place with 25 percent.
• In a similar vein, of more than 6,000 Realtors surveyed for last week’s NAR 2024 Member Profile, 26 percent pointed to inventory as one of two top issues holding their clients back. Only affordability, which like rates is deeply connected to inventory, ranked as highly as a client stumbling block.

The point is that agents are feeling the challenges — high rates, low demand, and still-low inventory — that are baked into the current market. And the survey shows that the most common response appears to be agents doubling down on their spheres:

• More than a quarter of agent respondents to the survey, or 28 percent, indicated that “almost all” of their recent listings came from repeat clients. That eclipsed all other responses to the question.
• Another 15 percent indicated that more than 75 percent of their listings came from repeat clients, while 23 percent revealed that between half and three quarters of their listings came from returning customers. All together, that means nearly two-thirds of agents are getting half or more of their listings from repeat clients.
• When brokers were asked what their agents should do to find new listings, a plurality of respondents, or 28 percent, selected “other” and then provided free response answers, many of which focused on sphere-building:
  • “Staying in touch with previous clients”
  • “Reaching out to sphere about existing equity in home”
  • “Referrals and repeats”
• A significant share of broker respondents also said their agents should focus on social media or SEO, at 25 percent, followed by direct mailers at 18 percent.

The thesis that emerges is that in a still-sluggish market, agents and brokers alike see industry professionals’ existing contacts as better resources than an array of other activities such as open houses, paid ads, or buying leads — all activities that garnered fewer responses in the survey.

The survey also offers a ray of hope, which is possibly a response to the numbers at the top of this story showing that inventory at least is getting better.

• A plurality of agent respondents to the survey, or 43 percent, said they believe their listing pipelines will be about the same in a year compared to now.
• Another 35 percent believe their listingpipelines will be heavier in a year. Meanwhile, only 22 percent think their pipeline will be lighter.
• All of which is to say, agents believe the future will be at least as good as the present — and plenty think it’ll be even better.

Email Jim Dalrymple II