Lower interest rates are prompting more buyers to come into the market, putting pressure on an already tight U.S. housing market and reversing 10 months of national inventory growth, according to realtor.com®'s July 2019 Monthly Housing Trend report. The report, which tracks key trends across the market, including the national median home price, days on market and inventory, showed flat inventory growth, which could lead to inventory declines sooner than originally predicted.
In July, active listings on realtor.com were flat, following slowing growth since the start of the year. Newly listed properties were down 7 percent from a year ago.
The national median home price in July was $315,000, up 5.5 percent from a year ago and a decrease from last year's year-over-year growth of 8.7 percent. Additionally, July prices were down 0.2 percent from June, marking the earliest seasonal slowdown in home prices since 2012. The median number of days on market in July was 58, the same as a year ago.
"July's data highlight tension in the housing markets between buyers eager to take advantage of lower mortgage rates and potential sellers concerned about slowing price growth," said George Ratiu, realtor.com's senior economist. "The decline in newly listed properties suggests that some would-be sellers are stepping back from the market, during the peak buying season, when most people are searching for their next home."
Ratiu noted that although overall housing inventory had been growing, the number of homes in the entry-level segment declined. Now that trends are shifting for the market as a whole, he said challenges for entry-level and first-time buyers are mounting, including faster price growth ahead.
The inventory of properties priced below $200,000 in July decreased 9.9 percent year-over-year, while at the same time, the inventory of homes priced above $750,000 increased 6.6 percent. Competition for entry-level homes continues to be tight -- homes priced below $200,000 only spent 56 days on the market, whereas properties priced over $750,000 spent 81 days on the market.
Despite these challenges, some millennials are finding success. The share of millennial mortgage originations increased to 46 percent from 43 percent last year, according to realtor.com's second quarter Generational Propensity report.
The report found the median home purchased by millennials was priced at $248,000, up 5 percent year-over-year, a bigger increase than either Gen X or boomers had in home purchase price. Looking across generational cohorts, the larger gains in the price of homes purchased by millennials reflect both the intense competition at the entry-level price point and the fact that some millennials have been delaying major life milestones (e.g. starting families, forming households, having children), and are skipping the starter home to purchase larger, trade-up homes.
The report also found that while Gen X and boomers have increased their down payment percentages, millennials saw the average down payment slip to 8.2 percent from 8.9 percent a year ago. This increased the size of the typical millennial loan amount to $227,000 from $215,000. Lower mortgage rates are helping to cushion the impact of buying a higher-priced home and making additional debt more affordable. The monthly mortgage amount that millennials paid on a newly purchased home fell to $1,099 from $1,131 year-over-year.