This story originally ran on Redfin.

Homebuyer demand posts biggest year-over-year decline in more than two years as inventory pressures subside

The Redfin Housing Demand Index remained roughly unchanged at 120.3 for the third consecutive month in July as inventory declines continued to moderate , allowing buyers to be more selective. Compared with June, 1.1 percent fewer people requested home tours, and there was a 12 percent drop in the number making offers.

While a handful of metro areas including Chicago, Boston and Phoenix posted month-over-month increases, demand across the 15 metros included in the Demand Index was overall unchanged as a result of declines in major metro areas in California and Seattle.

The Redfin Housing Demand Index is based on thousands of Redfin customers requesting home tours and writing offers in 15 major metro areas in the U.S. The Demand Index is adjusted for Redfin’s market share growth and for seasonality. A level of 100 represents the level of homebuyer demand posted in January 2014. You can learn more about the methodology behind the Redfin Housing Demand Index and the data sources we use to measure housing activity prior to purchase.

July marks the fifth consecutive month of year-over-year declines in the Demand Index, falling 11.9 percent, the largest such drop since March 2016. The number of homebuyers requesting tours fell 6.3 percent year over year in July while the number writing offers fell 19.7 percent, the largest annual decline in offer activity since March 2016.

“Just above 120, the Redfin Housing Demand Index signals that homebuyer demand remains pent-up at a relatively strong level,” said Sheharyar Bokhari, senior economist at Redfin. “However, the fact that tour and offer activity is not surging alongside inventory in hot markets like Seattle and San Diego, suggests that there’s a mismatch between what sellers are offering and what buyers want. It could be that homes are priced higher than buyers are willing to pay, or that the homes being listed don’t meet the criteria buyers are seeking. As a result, we’ve already begun to see prices grow at a slower rate, a trend we expect to continue.”

In the interactive chart here, use the dropdown menu in the upper righthand corner to display and download national and metro-level data.

Market by market, there were wide variations in the direction of year-over-year inventory changes, with double-digit increases in Seattle (28.6%), Portland (22.8%), and San Diego (17.3%), as well as large declines in Phoenix (-13.1%), Austin (-4.9%), and Chicago (-4.4%).

“What I’m hearing now is that buyers are considering lots of options, a significant change from the dynamics we’d grown accustomed to over the past few years,” said Jessie Culbert, a Redfin agent who works with sellers in Seattle, where the Demand Index fell by 1.4 percent month over month and by 18.3 percent year over year in July.

Culbert continued, “I recently called an agent, requesting feedback on my listing after he toured it with buyers, and he said, ‘can you remind me which place that was? We toured 16 homes on Saturday.’ It’s the same thing for buyers; they might visit seven or eight open houses in a weekend, which is a big change from last spring and even last winter, when buyers were in a consistent rhythm. New listings came on, buyers would tour them as soon as they could, and then write an offer by the offer review date.”