Home inventory soars at record rate with U.S. buyers pulling back

The supply of homes for sale across the U.S. grew at a record rate last month, another sign that higher mortgage costs are cooling down the housing market.

The number of active listings nationwide jumped 31% from a year earlier, a record-high increase for a third straight month, according to a report Tuesday by Realtor.com. 

The Federal Reserve's effort to curb inflation by raising benchmark interest rates has put the brakes on the pandemic housing frenzy. This year's jump in mortgage costs has sidelined many would-be buyers, and the decline in demand is leaving more homes on the market. Sellers are responding by trimming their prices to compete — a potential bit of good news for shoppers still in the hunt.

"With inventories increasing, buyers will have more negotiating power," said Danielle Hale, chief economist for Realtor.com. "The two years of a market heavily tipped in favor of sellers appears to be in the rearview mirror."

Inventory has yet to return to pre-pandemic levels. And even as options increase, competition for homes remains strong, keeping prices elevated. The nationwide median list price in July was $449,000, up 17% from a year earlier and close to the all-time high reached in June. The affordability crunch and remote-work policies have been pushing some people to relocate to less-expensive areas.

New listings last month contracted for the first time since March, down 2.8% from a year earlier, suggesting some owners are reconsidering their plans to list with the market shift.