May 2023 Housing Update (Rental Inventory Surge)

May 2023 was a step in the right direction for homebuyers across America. For Sale Inventory, which had been on a downward trend since last October, finally registered positive growth. Particularly in certain counties across California, Utah, and Washington.

Moreover - Rental Inventory on the market had a big surge in May. Especially in states like Texas and Florida, where many would-be sellers are electing to rent their property instead of sell it. Which is increasing the number of vacant rental listings and putting downward pressure on rents.

All told - it's still a very tough market to be a buyer with restrained inventory and mortgage rates now back to 7%. However, May represented a step in the right direction. Let's dig into the data so you can see what's happening.

Preliminary Inventory Data from Zillow

At the end of each month I manually track inventory figures in 54 large counties in America using search results from Zillow. These inventory figures only include houses and townhomes (and exclude apartments/condos).

You can see that at the end of May, there were 147k houses listed for sale in the counties I track. Which was up from its level in April, breaking a streak of six straight months of inventory declines. This figure was also up 16% from the inventory levels last year in May 2022.

Of course, these for sale inventory figures are also down 30% from their peak in October 2022. A sizable drop due to seasonal factors and stubborn sellers deciding to rent their properties instead of sell them.

You can see that rental inventory never suffered a drop in the winter. And in the last month rental inventory surged up to 79k, which is 71% higher than a year ago.

Ultimately the fact that rental inventory is still increasing substantially is a good sign. Because it means that there will likely be continued downward pressure on rental rates. Which will eventually shift its way into home prices (especially in certain cities that we'll cover later in the post).

BEST For Sale Inventory Counties in May 2023

But back to For Sale Inventory first. Certain counties added quite a few homes on the market in May 2023.

Particularly in Santa Clara County in the Bay Area, where listings increased by 20% on a month-over-month basis.

Registering in second place was Hennepin County in Minneapolis, where listings rose 17%. And Salt Lake City came in third with a 14% surge in inventory.

Other counties with big monthly inventory increases were located in San Francisco, Seattle, Boise, Dallas, Atlanta, and Austin. All told, 41 of the 54 counties I track registered an increase in For Sale Inventory. Which is good.

Now, a warning: the data we're analyzing here is monthly. And subject to seasonality. So we can't really say that this the start of a trend yet. However, I feel fairly confident that as the spring shifts into the summer, inventory levels in many counties will keep increasing. It's a matter of how much they increase that will determine the extent of the home price reductions coming in the second half of 2023.

WORST For Sale Inventory Counties in May 2023

Of course - not all counties registered an inventory gain in May. In fact, some experienced fairly sharp declines. Like Montgomery County in Washington DC at -6.9%.

Additionally - Las Vegas and Phoenix continue to get hammered by a lack of new seller listings. With their inventory levels dropping 4 to 6% on the month.

Miami and Jacksonville also registered for sale inventory declines in May. Which is actually fairly common for this time of year since Florida's housing market is exiting its busy season right now (just as the rest of America is entering it).

However, despite the seasonal decline in for sale inventory in some Florida markets, properties on the market for rent keep increasing. In fact, Florida is second only to Texas in how many vacant rentals are showing up on the market this spring.

Insane Growth in Rental Inventory in Texas and Florida

More vacant rentals might be frustrating to hear about for a homebuyer in the short-term. Because it means fewer houses available to purchase right now. But over the long-term more vacant rentals is a good sign for homebuyers because it signals that supply in the market is outpacing demand. An indication that rent growth will continue to decelerate/decline, which will inevitably spill over into home prices over the long-term.

Especially in a market like Dallas, TX. Where in Collin County the number of vacant rental listings has increased by a whopping 181% YoY. With similar growth also registered in nearby Dallas County.

Austin and Houston also dominate the Top 10. With 130-150% growth rates in vacant rental listings in May 2023 compared to May 2022.

But one market that has really caught my attention is Miami, FL. Because all three counties in the metro are registering insane increases in vacant rentals. Particularly Palm Beach County where there's been 160% growth. This implies that significantly fewer people are moving to the Miami area compared to one year ago.

Metros like Detroit, Atlanta, Salt Lake, Riverside, and San Diego also registered large increases in rental listings. Something to watch out for in upcoming months as more downward pressure is exhibited on these rental markets.

Inventory data by ZIP Code

One thing to take note of as a homebuyer or investor is that these inventory trends can vary significantly within a county or city.

If you want the full picture on where prices will decline (or keep increasing), you really need to look at this data by ZIP Code.

For instance, take a look at this snapshot of urban Dallas from Reventure App. You can see that there are some high inventory ZIPs on the East/ Southeast side where listings are up 200-300% YoY. Meaning literally 3-4x more homes for sale this year compared to last. It's more favorable to be a buyer in these locations right now.

But there's also low inventory ZIPs directly to the northeast of Dallas where for sale inventory is only up 20% YoY. And is still at very low overall levels, creating higher buyer competition and more bidding wars.

What's crazy is that homebuyers in these two neighborhoods would have vastly different experiences if they went to buy a house right now. Even though they'd only be 10 miles apart.

Which highlights the importance of understanding inventory, price cut, and appreciation trends in your neighborhood specifically. Something the Reventure App gives you the power to do.

To find the data for your ZIP Code, make sure you select the ZIP Code view toggle at the top. You will then be prompted to select your metro. Then go to Select Data Point, Click to see More, and select For Sale Inventory Growth YoY.

What are you seeing in Your Market?

Lastly - I'd love to hear some feedback in the comment section about what you are seeing on the ground in your housing market at the end of May. Have you noticed an uptick in listings? Or is competition still fierce?

Have 7% mortgage rates started to result pending sales falling out of contract?

You guys are my eyes and ears on the ground of the housing market. So let me know what you're seeing.

Note: Reventure App inventory data is currently updated through April 2023. It will receive its update for May in about 10 days for every ZIP, County, and Metro in America.

-Nick