The U.S. housing market, long plagued by inventory droughts, is finally starting to pick up supply. But now in many places buyers simply don’t appear.
Sellers are faced with the fact that higher rates for longer terms stifle demand during what is typically a key season for the market. And even more such owners cutting Asking prices are higher than at any time since November 2022 as inventory ages, according to Redfin Corp.
“With mortgage rates back up more than 7%, homebuyers’ willingness to take action this season has waned,” said Ralph McLaughlin, senior economist at Realtor.com. “You can have high prices or high mortgage rates, but you can’t have both for long.”
Earlier this year, the prospect of a rate cut by the Federal Reserve brought some optimism to the housing market, which was just emerging from a recession. worst year for sales of previously owned homes in nearly three decades. But the economy continued to grow, dampening hopes of a rate cut anytime soon.
“Without a rate cut, cold reality will set in for the housing market,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Buyers receive little, if any, relief from high borrowing costs. The average rate on a 30-year mortgage has hovered around 7% since mid-April. And prices continued to rise. For the four weeks ending May 26, the average sales price was up That’s up 4.3% from a year earlier to a record $390,613, according to Redfin.
Home lovers of all stripes are being forced out of the market. New Home Sales – Bright Spot for Inventory-Tight Market – fell in April. Contracts to buy existing homes this month fell to its lowest level in four years. The pullback is leading to a backlog of listings rather than finding buyers, according to Realtor.com’s McLaughlin.
The spring selling season so far has been “definitely disappointing,” said Lawrence Yun, chief economist at the National Association of Realtors. “At the beginning of the year, I thought sales would increase throughout the year.”
Countrywide
While U.S. sales are down on average, geography matters. Sun Belt markets including Florida and Texas, which boomed with an influx of new arrivals during the pandemic, are now cooling in part because people have been priced out, according to Redfin. Meanwhile, metros in the West such as Seattle and the San Francisco Bay Area saw steeper corrections in late 2022 and are already starting to recover.
Contract signings are down at least 14% in Houston, West Palm Beach, Florida and Atlanta, but got up about that amount in San Jose, California, according to Redfin’s annual data for the four weeks through May 26. Redfin’s pending sales rate fell 3.4% nationwide.
Eighteen months ago, homes in the booming suburbs north of Nashville wouldn’t have lasted even a day on the market, says Don Hackford, a real estate agent in Hendersonville, Tennessee. Currently, a developer client recently took two homes off the market after receiving several low-cost offers.
“Everything has kind of stalled, and it’s frustrating for realtors because it’s like we’ve been shut down,” Hackford said. “There is no work.”
A thriving region along the southwest coast of Florida hard blow Thanks to soaring home insurance rates, the number of active listings for single-family homes in the Punta Gorda area has doubled over the past year to 2,143. Meanwhile, the median sale price of a single-family home in April fell nearly $30,000 to $351,000. compared to last year, said Lynn Walker, local broker and president of Punta Gorda-Port Charlotte-North Port DeSoto Inc. Realtors.
“Everything got very flat,” Walker said. “This market has become largely a consumer market. There is a big reduction in prices.”
Price growth could slow further in the coming months, said Redfin economist Chen Zhao. But any slowdown is likely to be slow, given pent-up demand from millennials who will likely continue to support the market.
“The general consensus is that rates will decline by now, leading to increased supply and demand and higher transaction volume,” Redfin’s Zhao said. “But instead we continue to head towards the bottom we reached about 18 months ago.”