Lower Mortgage Rates Spur Listings, Housing Supply Still Limited

The recent decline in mortgage rates is encouraging more homeowners to list their properties, yet the modest increases have not yet brought the housing market’s inventory back to pre-pandemic levels. According to data from Realtor.com, the number of active listings, excluding those pending finalization, rose 4.9% to 714,176 in December compared to the previous year, marking the most substantial annual increase since June.

This growth was driven in part by a 9.1% surge in new listings, representing properties entering the market for the first time in December—a second consecutive annual increase following 17 months of declines. Despite the month-to-month decrease in active listings typical of December, the 5.5% drop was less than the usual decline ranging from 6.8% to 13.2%, as reported by Realtor.com.

While the rise in home listings is positive news for potential buyers, the housing market remains constrained, with for-sale inventory still significantly below pre-pandemic levels. In December, active listings were down 30.9% compared to the same month in 2019, and new listings were nearly 12% lower.

Realtor.com’s chief economist, Danielle Hale, sees this increase as a positive development for the housing market but emphasizes the need for sustained growth into January and February to address the ongoing inventory challenge. Various factors, including below-average new home construction and demographic trends leading to longer homeownership, have contributed to the persistent shortage of homes for sale.

Although homebuilders have increased construction efforts, the primary source of for-sale inventory remains homeowners deciding to sell. However, many are hesitant due to years of rising home prices and the substantial gap between current mortgage rates and those from just a few years ago, discouraging those who secured lower rates from selling.

Despite recent rate declines, with the average 30-year mortgage rate at 6.66%, housing economists predict a continued decrease throughout the year, likely not falling below 6%. This may not be sufficient motivation for homeowners with rates below 6% to sell, and with the upcoming spring homebuying season, sellers are expected to have the advantage as buyers contend for a relatively limited supply of homes.