More small houses are starting to hit the market, and it's another sign that the bonkers housing market is starting to get a little better

• The real estate market is slowly getting better, particularly for anyone looking for a small house.
• The share of small houses for sale jumped in July 2021, according to Realtor.com data.
• Plus, new listings are up 6.5%, homes are getting more affordable, and competition has slowed.

House-hunters, rejoice: The wild real estate market might finally be getting better, particularly for first-time buyers or anyone looking for a small house.

Yes, inventory is still low nationwide, down 33.5% in July compared to the year prior, according to new Realtor.com data. But the decline is less than the drop in June (43.1%), new listings have risen 6.5% nationwide compared to the same period last year, and the inventory coming on the market could spell some good news for buyers looking for an affordable home: Smaller homes are slowly gaining a larger share of the inventory, according to the data.

When it comes to single-family homes, the share of houses for sale between 750 and 1,750 square feet jumped to 36.3% in July 2021, up from 30.2% during the same time last year. Meanwhile, the inventory of homes between 3,000 and 6,000 square feet dropped to 20.1%, down from 24.2% in July 2020.

At the same time, houses are getting more affordable. While the median home price for active listings in the US stayed the same between June and July this year - $385,000 - the median listing price increased at a slower rate in July than in the month prior, according to Realtor.com.

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Overall, this means a rosier outlook for homebuyers, according to Sabrina Speianu, a senior economic research analyst at Realtor.com and the report's author.

"For homebuyers, this means that there may be more affordable inventory available depending on their metro-area," she wrote. "For home sellers, this means that while their home values are still growing, they may need to consider pricing more competitively than they have in the past."

Less competition and dropping prices

When people began snapping up homes in 2020 due to a pandemic-induced desire for more space and low interest rates, it led to soaring prices and aggressive bidding wares that boxed many buyers out of the market. While the craze has led to some homeowners making big money, it's also led to regrets among homebuyers who snapped up homes too quickly.

According to a recent report from from real estate website Redfin, there's less competition now than there was a few months ago. Homes are spending slightly longer on the market - 16 days on average - and, for the first time since 2018, people no longer cite bidding wars as the main reason they weren't able to get the home they wanted, according to the Housing Trends Report released by the National Association of Home Builders.

Sellers are have also started dropping their prices, with the share of listings that had price drops in July rising to 4.7%, the highest percentage since 2019, according to Redfin.

Fewer people are also applying for mortgages: The Mortgage Bankers Association reported that applications dropped 1.7% week-over-week during the week ending July 30, hitting their lowest level since May 2020.

Plus, while people requesting home tours was up 14% from January 1 to August 3, that's a smaller spike than the 39% jump during the same period in 2020, Redfin reported, citing data from home tour technology company ShowingTime.

So while these shifts may be meager, they're positive signs that buying a house is slowly but surely getting a bit easier.