Home for sale in Chicago, Illinois.
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Perhaps one of the slimmest housing markets in history has some fat. The supply of homes for sale may increase in the next few weeks, according to new data from Realtor.com.
In April, inventory was 12% lower than in the same month last year, the smallest year-over-year decline since the end of 2019. Another reading for just the last week in April shows inventory is down just 3% from a year ago.
“April data suggests a positive turn of events looms for weary buyers: if the trends we are seeing now hold, we will likely see year-over-year stock growth over the next few weeks,” said Danielle Hill. Chief Economist at Realtor.com.
The shift in supply is likely due to the slowing pace of sales caused by the recent rapid increase in mortgage rates, which has made expensive home prices more expensive. The 30-year average fixed interest rate has jumped more than 2.5 percentage points since the start of the year.
New listings are down 0.9% in April from a year ago, and the number of active listings is still 67% lower than pre-pandemic levels. Driving the growth in supply is homes for medium-sized families, with fewer of them being contracted despite it being the spring market, and it’s a popular time for families to shop for homes.
High mortgage rates, along with record high home prices, have sidelined much of the competition. Home prices have risen about 34% since the start of the pandemic. According to Realtor.com, the monthly mortgage payment on a $400,000 home, with a down payment of 20%, is now $467 more than it was in March 2020.
These factors translate into fewer potential buyers and a slowdown in bid wars.
“Sanes seem to be going backwards,” said Paul Legere, a buying agent with the Joel Nelson Group in Washington, D.C. His lender says one in four potential mortgage borrowers has exited the market due to high interest rates.
“The 25% drop in buyers leads us to some kind of plausibility, but it’s still tough for less powerful buyers,” Legere said. He said the million-dollar market was still “active”.
The typical home spent just 34 days on the market, six days less than last year, which broke the previous record low of 36 days in June 2021, according to Realtor.com. Homes sell at the fastest pace throughout the year in the following markets: Miami, St. Louis, Raleigh, Orlando and Hartford.
Although it’s not one of the fastest-moving markets, offers are still strong in the Boston area, even in the luxury segment, according to real estate agent Dana Paul of Sotheby’s International Realty.
“Price has not calmed down yet, but some sellers have unrealistic expectations about price. Some tough conversations took place before the listing to set expectations with sellers,” Paul said. “Although inventory is rising, buyers are still getting out of the woodwork and sticking to the house landings, so it appears that new inventory and new demand are increasing at a steady pace.”
The key to inventory growth will be fewer buyers and more sellers, but the terms of affordability don’t exactly favor that. Homes are now less expensive in 95% of US housing markets compared to their historical averages, according to recent calculations by Black Knight, a mortgage technology and data provider.
Another Gallup poll found that about 70% of Americans say Now is a bad time to buy a house. This is the highest percentage since the polling organization began asking the question in 1978.
“The next eight weeks are going to be crucial for buyers and sellers because this is a time of crisis,” Paul said. “Buyers want to secure their homes right now, and sellers want to take advantage of peak demand.”
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