The U.S. housing market, long crippled by inventory shortages, is finally starting to see an increase in the number of homes listed. But now, in many places, buyers are not showing up.
Sellers are grappling with the fact that higher long-term interest rates are dampening demand during what is typically a critical season for the market. Redfin Corp said more owners are lowering asking prices than at any time since November 2022 as inventory becomes older.
“With mortgage rates back above 7 percent, homebuyers have become less willing to purchase a home this quarter,” said Ralph McLaughlin, senior economist at Realtor.com. “You can have high home prices, or you can have high mortgage rates, But you can’t have both for long.”
Heading into this year, the prospect of a rate cut from the Federal Reserve has stoked some optimism about a housing market that is coming off its worst year for existing home sales in nearly three decades. But the economy continues to grow strongly, and hopes for a short-term interest rate cut are gradually fading.
“Without a rate cut, the housing market will face a stark reality,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Buyers have received little, if any, relief from high borrowing costs. The average interest rate on a 30-year mortgage has been hovering near 7% since mid-April. And prices continue to climb. In the four weeks ended May 26, the median sales price rose 4.3% from the same period last year to a record $390,613, according to Redfin.
Homebuyers of all kinds are being priced out of the market. New home sales – a bright spot in an inventory-tight market – fell in April. Existing home purchase contracts fell to their lowest level in four years that month. Realtor.com’s McLaughlin said this pullback has led to listings accumulating rather than being matched with buyers.
Lawrence Yun, chief economist for the National Association of Realtors, said the spring selling season so far has been “absolutely disappointing.” “At the beginning of the year, I thought sales were going to grow throughout the year.”
All over the country
While average sales in the U.S. are declining, location matters. Sun Belt markets including Florida and Texas that boomed during the pandemic with an influx of new immigrants are cooling, in part because people are priced out of their homes, Redfin said. Meanwhile, Western metropolitan areas such as Seattle and the San Francisco Bay Area saw a more dramatic correction at the end of 2022 and have already begun to recover.
According to Redfin’s year-over-year data for the four weeks ended May 26, contract signings fell by at least 14% in Houston, West Palm Beach, Florida, and Atlanta, but contract signings increased significantly in San Jose, California. 3.4%.
Eighteen months ago, homes in Nashville’s booming suburb north wouldn’t even spend a day on the market, said Don Hackford, a real estate agent in Hendersonville, Tenn. Now, one developer client recently took two homes off the market after receiving some lowball offers.
“Everything is at a standstill, which is frustrating for real estate agents because we’re like shut out,” Hackford said. “no job.”
On Florida’s southwest coast, a prosperous region hit hard by soaring home insurance rates, the number of active single-family home listings in the Punta Gorda area doubled in the past year to 2,143. Meanwhile, the median sales price for a single-family home in April was down nearly $30,000 from a year earlier, said Leanne Walker, a real estate agent and local agent with Punta Gorda-Port Charlotte-North Port-DeSoto Real Estate. , to $351,000.
“It became very flat,” Walker said. “It has become a buyer’s market. A lot of price cuts are happening.
Price growth is likely to slow more broadly in the coming months, said Redfin economist Li Chen. But any slowdown is likely to be gradual, given that pent-up demand from millennials is likely to continue to buoy the market.
“The consensus expectation is that interest rates have now fallen, bringing more demand and supply and higher volume,” Redfin’s Zhao said. “But instead, we are continuing to hover around the bottom we hit about 18 months ago.”
