The housing market took an unexpected dip in May, with home sales dropping year-over-year despite a surge in new listings.
A report published by Redfin's Research Center indicated that home inventory was up 9.1 percent in May. That number represents the highest number of new listings to come onto the market in the last four years. The biggest increases in new listings were in Ventura, West Palm Beach, and Baltimore.
At the same time, the actual number of homes sold dropped 10 percent. The drop in actual sales surprised analysts, who had been predicting a flood of new home purchases once inventory was in greater supply.
The drop in actual sales creates questions about whether potential buyers are as interested in getting into the market as they were once perceived.
"Housing is at an inflection point, where traditional buyers are needed to fill the gap in demand left by waning investors who dominated the market last year," said Redfin chief economist Nela Richardson. "Low wage growth has stunted demand in some metros; others have been plagued by persistently low inventory. Metros that are reversing these trends, with rebounding job growth and inventory increases, will see the resurgence of traditional buyers necessary for stable housing markets."
The report notes that real estate agents are seeing the balance of power shifting back in the buyers' direction as higher inventory gives them more choices and more negotiating power.
"The past two years have been extremely challenging for buyers," remarked Los Angeles-based agent John Venti. "For example, last spring it wasn't uncommon for homes to have upwards of 20 to 30 offers. This year, I've seen the market shift in buyers' favor; they are now having a much easier time finding homes and getting their offers accepted.
"Demand is still high, but the inventory crunch is easing as more listings hit the market," he finished.