Small increase in supply but rising rates are slowing demand

The US housing market is starting to see an increase in supply in some markets but buyers are not necessarily in a hurry to take advantage of the extra choice.

Markets posting rising inventories may not see sales follow as rising interest rates and high prices giving potential buyers cause for caution according to an analysis of 171 metros by Redfin.

"Rising mortgage rates, paired with already high home prices, are giving pause to homebuyers in expensive West Coast markets," said Redfin chief economist Daryl Fairweather. "Some of these places are finally seeing the number of homes for sale surge after years of a supply drought. But buyers who earlier this year would have put in a bid on any home in their target neighborhood are now being more choosy. With home prices growing slowly, buyers want to be absolutely sure that the home they buy is a home they will stay in for years to come."

The priciest markets - including Los Angeles, San Jose, and Seattle – are showing double-digit declines in sales while relatively-affordable inland markets – such as Pittsburgh and Grand Rapids, Michigan – are seeing their share of national sales increasing year-over-year.

"Last year and earlier this year, Seattle, San Jose and Denver were the hottest markets with homes selling in days, not weeks. These metros have now been replaced by Grand Rapids, Omaha, Nebraska, and Indianapolis as the fastest markets in the country," said Fairweather.

Inventory nudges higher
Redfin’s data shows a 0.2% rise in inventory year-over-year in September while listings were up 3.6%.

"But buyers seemed reluctant to make offers and purchase that new inventory, as September sales fell 4.8% year-over-year," added Fairweather.