A house is listed for sale in Chicago, Illinois.
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One of the leanest housing markets in history could take on some fat. The supply of homes for sale could increase in the coming weeks, according to new data from Realtor.com.
Inventories in April were 12% lower than the same month last year, the smallest year-over-year decline since the end of 2019. Another reading for the last week of April shows that inventories are only down about 3% from a year ago. .
“April data suggests that a positive turn of events is on the horizon for weary shoppers: if the trends we are currently seeing continue, we could potentially see year-over-year inventory growth. another over the next few weeks,” said Danielle Hale, chief economist for Realtor.com.
The shift in supply is likely due to a slower pace of sales resulting from the recent rapid increase in mortgage rates, which has made expensive homes even more expensive. The average 30-year fixed rate has jumped more than 2.5 percentage points since the start of the year.
New listings were down 0.9% in April from a year ago, and active listings are still down 67% from pre-pandemic levels. Supply growth is being driven by mid-size family homes as fewer are under contract despite the spring market, a popular time for families to buy homes.
Higher mortgage rates, combined with record home prices, have shut out much of the competition. Home prices have risen about 34% since the start of the pandemic. The monthly mortgage payment on a $400,000 home, with a 20% down payment, is now $467 more than it was in March 2020, according to Realtor.com.
These factors translate into fewer potential buyers and a slowdown in bidding wars.
“The sanity seems to be coming back,” said Paul Legere, buying agent for the Joel Nelson Group in Washington, DC. According to the lender he works with, one in four potential mortgage borrowers have been squeezed out of the market due to rising rates.
“The 25% reduction in buyers gets us to some kind of reasonableness, but it’s still tough for less-than-strong 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 a year ago, which broke the previous record of 36 days in June 2021, according to Realtor.com. Homes sold at the fastest rate year over year in the following markets: Miami, St. Louis, Raleigh, Orlando and Hartford.
While not one of the fastest-growing markets, offers are still strong in the Boston area, even in the luxury sector, said realtor Dana Bull of Sotheby’s International Realty.
“Prices haven’t come down yet, but some sellers have unrealistic price expectations. Tough conversations take place before listing to set expectations with sellers,” Bull said. “Although inventory is up, buyers are still coming out of the woodwork and committing to land homes, so new inventory and new demand appear to be rising in tandem.”
The key to inventory growth will be fewer buyers and more sellers, but affordability conditions aren’t exactly conducive to that. Homes are now less affordable in 95% of U.S. real estate markets than their historical averages, according to recent calculations by Black Knight, a provider of mortgage technology and data.
Another Gallup survey found that about 70% of Americans say now is a bad time to buy a home. It is the highest share since the polling organization started asking the question in 1978.
“The next eight weeks or so are going to be crucial for buyers and sellers because this is the critical time,” Bull said. “Buyers want to secure their homes now, and sellers want to capitalize on peak demand.”