A house in Chicago, Illinois is offered for sale.
Scott Olsen | fake images
One of the leanest real estate markets in history could be getting fatter. The supply of homes for sale could increase in the coming weeks, according to new data from Realtor.com.
In April, inventory was 12% lower than the same month last year, the smallest year-over-year decline since late 2019. Another reading for just the last week of April shows inventory was down just 3% from to the previous year. .
“April’s data suggests a positive turn of events is coming for weary shoppers: If the trends we’re seeing now hold, we could see year-over-year inventory growth in the coming weeks,” said Danielle Hale, senior economist. head of Realtor.com.
The change in supply is likely due to a slower pace of sales stemming from the recent rapid rise in mortgage rates, which has made expensive homes even more expensive. The average 30-year fixed rate has risen more than 2.5 percentage points since the beginning of the year.
New listings fell 0.9% in April compared to a year ago, and the number of active listings remains 67% below pre-pandemic levels. The growth in supply is being led by midsize family homes as fewer are under contract despite it being the spring market, a popular time for families to buy homes.
Higher mortgage rates, combined with record home prices, have pushed out much of the competition. Home prices have risen 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 are translating into fewer potential buyers and a slowdown in bidding wars.
“Sanity seems to be coming back,” said Paul Legere, a buying agent with the Joel Nelson Group in Washington, DC. He said the lender he works with says that one in four potential mortgage borrowers has been pushed out of the market because of higher rates.
“The 25% reduction in buyers brings us to some sort of sanity, but it’s still tough for less strong buyers,” Legere said. He said the million-dollar market remains “vigorous.”
The typical home spent just 34 days on the market, down six days from a year ago, which beat 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 it’s not one of the fastest-moving markets, deals remain strong in the Boston area, even in the luxury sector, said realtor Dana Bull of Sotheby’s International Realty.
“Pricing hasn’t cooled off yet, but some sellers have unrealistic expectations on price. Some tough conversations are taking place ahead of the listing to set expectations with sellers,” Bull said. “Although inventory is on the rise, buyers are still getting out of the woodwork and committed to landing homes, so new inventory and new demand appear to be rising in unison.”
The key to inventory growth will be fewer buyers and more sellers, but affordability conditions don’t favor that. Houses are now less affordable in 95% of US housing markets compared to their historical averages, according to recent calculations by Black Knight, a provider of mortgage data and technology.
Another Gallup poll found that about 70% of Americans say now is a bad time to buy a house. That’s the highest proportion since the polling organization began asking the question in 1978.
“The next eight weeks are going to be crucial for buyers and sellers as this is a pivotal time,” Bull said. “Buyers want to secure homes right now, and sellers want to capitalize on peak demand.”