Buyers in expensive neighborhoods find more homes for sale

Home buyers in high-priced housing markets saw some relief in July, but it’s too early to tell whether that trend will continue.

The inventory of homes listed for sale increased year-over-year in 16 of the 45 largest metropolitan areas nationwide in July, according to a report released Wednesday by They included markets that have experienced some of the most pronounced home price growth since the Great Recession, such as San Jose, Calif., and Seattle.

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Over the past few years, the number of homes listed for sale has shrunk considerably as more existing homeowners chose to stay put and homebuilding activity slowed to a crawl. Housing inventory continues to shrink, decreasing 4% year-over-year in July. Nevertheless, that’s slower than the 8% average rate of decline posted over the past year.

Higher costs of labor and materials and a low number of available lots have constrained homebuilding in recent years, said Danielle Hale, chief economist at But in places like San Jose, where there’s greater demand for high-priced homes, builders are now finding more flexibility. “Builders can more easily pass on some of the increased costs they’re facing through high-end construction,” Hale said.

In other words, home builders will have to pay a higher price for things like lumber and construction workers regardless of the property they construct. Consequently, they’re more attracted to building trade-up homes or homes in pricier markets, since that will offset these added expenses, Hale said.

This helps explain why the inventory of homes listed above $350,000 increased 5.7% year-over-year, while the inventory of homes being sold for less than $200,000 has dropped 15.6%.

Builders are also sensitive to market sentiment. If buyers are indeed getting discouraged — whether because of the high home prices, rising mortgage-related costs or growing concerns about a potential recession — that could ultimately discourage new home building. And then many buyers may find themselves right back where they started, with fewer homes to choose from.