Elevated mortgage rates are still keeping some homeowners from listing this spring, despite market conditions tipping in their favor.
According to Realtor.com, there were 21.3% fewer homes listed for sale in April compared with the same month last year, largely due to potential sellers feeling ‘rate-trapped’ by their current mortgage. A separate study by Altos Research revealed that inventory of single-family homes for sale in the U.S. fell to 419,000 for the week ending May 8, during a period when listings typically inch up.
Said Redfin chief economist Daryl Fairweather on Twitter: “Homeowners are quiet quitting the housing market.”
For homeowners, the decision to stay put doesn’t come as a surprise; high rates and home prices make, for many, the prospect of trading up unappealing — especially folks with low rates.
At the same time, the lack of supply has worsened affordability for potential homebuyers as demand picks up. “Homeowners were able to lock in 3% mortgage rates during the pandemic and they don’t want to give those up, especially if they have to move they’re going to be facing a 6.50% interest rate,” Fairweather told Yahoo Finance Live (video above).
“They’re just bowing out,” she added. “New listings are down over 20% from last year, which is really constricting inventory and means that if you’re a buyer, there isn’t much to choose from, and you’re still going to be competing for those really desirable homes on the market.”
The inventory crunch — and higher prices — have made purchasing conditions more difficult.
According to Redfin, homebuyers are “snapping up” homes quickly despite the higher mortgage rates —thus keeping home prices from falling much — 3% annually according to the latest data.
Still, some homebuyers aren’t giving up easily.
“Given how high interest rates are you would have expected prices to come down a lot, but because there’s not any new listings, it means that buyers are still competing,” Fairweather said.
For instance: the median price of all single-family homes for sale increased to $449,000 the first week of May, Altos Research found, up 0.9% from $445,000 the week before. Meanwhile, the median price of newly listed homes jumped 3.4% to $419,970 from $406,000 the week ending May 1.
New construction could be a silver lining, Fairweather said.
“We really need to build more homes and that’s where I’m a little bit more optimistic because the jobs report just came out. There are new construction jobs being added.”
Sales for new homes were down 3.4% compared to a year ago in March, but the mild slowdown had led some builders to offer incentives to attract buyers.
“We’re seeing builders out there because people can’t buy existing homes or aren’t ready for sales. They’re moving to new construction, and that’s going to help the inventory in the long run. When the housing market does come back when mortgage rates come back,” Fairweather said.
She added: “I’m optimistic that there’s going to be more inventory because of this added supply of new construction.”
Source: finance.yahoo.com
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