High mortgage rates have dampened home-buying demand, although a dwindling inventory has resulted in available properties selling out fast in some parts of the country.
In the four weeks ended April 2, new listings declined by 21.8 percent compared to a year earlier, according to a
news release on April 6 by real estate brokerage Redfin. This is one of the biggest drops since the beginning of the COVID-19 pandemic, and has contributed to an “unseasonal early-spring decline” in the number of homes available for sale. The decline in new listings means fewer homes are on the market. As such, buyers are snapping up homes fast, according to the brokerage.
Almost half of the homes going under contract are doing so within two weeks, which is up from a quarter at the beginning of the year.
At the present level of supply, homes for sale would be diminished at only 2.8 months, which is a sharp drop from late January, when there was 4.5 months’ worth of supply. In Denver, there are only 1.6 months of supply.
Homeowners are said to be hesitant to sell their homes due to their unwillingness to give up the low interest rates on existing mortgages. During 2021, mortgage rates were around sub-3.0 percent level. Now, rates have almost doubled, to 6.28 percent.
“Elevated mortgage rates are perhaps an even bigger deterrent for would-be sellers than for would-be buyers. Giving up a 3 percent mortgage rate for one in the 6 percent range is a tough pill to swallow,” said Redfin deputy chief economist Taylor Marr.
“Today’s serious homebuyers have grown accustomed to the idea of a 5 percent or 6 percent rate and have adjusted their budgets accordingly. The lack of homes hitting the market explains why the market is moving fast, even though sales are still down. The lack of new listings is also one reason why sales are down. Buyers can’t buy if sellers don’t want to sell.”
Rising Pending Sales
Pending home sales recorded a third consecutive growth in February, according to the National Association of Realtors (NAR).The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—rose by 0.8 percent for the month. However, it was down by 21.1 percent compared to a year ago.
Since a home goes under contract a month or two prior to being sold, the PHSI tends to usually lead existing-home sales data by up to two months.
“The affordable U.S. regions—the Midwest and South—are leading the recovery,” said NAR chief economist Lawrence Yun, according to an NAR
press release on March 29.
“Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amid uncertainty in the financial market. While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available.”
Drop in Home Prices, Best Sales Time
For the past few years, home prices were consistently rising on an annualized basis, a trend that only broke in February, according to the NAR.The median existing-home price was $363,000 in February 2023, which is down 0.2 percent compared to February 2022. “This ends a streak of 131 consecutive months of year-over-year increases, the longest on record,” the NAR
said in a statement.
However, affordability still poses a problem for many buyers, with the median U.S. home price being up 45 percent compared to February 2019.
For homeowners looking to sell, this month could be the best time to carry out the transaction. A
study by Realtor.com found that the week of April 16–22 is the best time to sell a home, with the sales netting an extra $48,000 during the week compared to what they would have earned at the beginning of the year.
