After a grueling winter of dashed hopes, US home shoppers are going through a brutal spring homebuying season.
If you’re in the market at all, odds are that you’re paying up for a home instead of grabbing the bargains that some headlines were predicting last year. The culprit: homeowners with historically low house payments see no reason to move, keeping their properties off the market.
That scenario — a result of the steepest Federal Reserve interest rate increases since the 1980s — has turned what’s left on the market into hot commodities. In March, for example, more than 300 people lined up to tour a 1,168-square-foot home in Durham, Connecticut, a town of just over 7,000 people about two-hours from Boston and New York City.
“I’ve never seen anything like this in Connecticut,” said Claudia O’Connell, the listing agent for the home at 51 Birch Mill Road, who attributed the home’s popularity to its proximity to the metropolitan areas and its modest size.
A few hours’ drive away in Wayne, New Jersey, Cassandra Small and her husband saw so much competition for slim pickings in February that they decided to offer $100,000 above the asking price on a home, The New York Times reported. Theirs was one in a flurry of 35 offers, and not the most attractive, either, according to the report.
Indeed, as fewer homeowners list their properties for sale, inventory is as tightening, creating a market that seems as competitive as it was when interest rates were half of where they are today. According to Redfin, there were only 533,310 newly listed homes for sale in March, down from 650,105 during the same time period in 2022.
Meantime, sales of the hard-to-find existing homes continue to slow, with those in April down 23.2% from the same period a year earlier according to the National Association of Realtors.
“This spring’s housing market is hot but cold, with scant listings making it less active than usual but fast and competitive at the same time,” Taylor Marr, the deputy chief economist at Redfin said in a housing report.
In markets like Durham’s, the flood of prospective buyers is keeping home prices elevated, bucking predictions last year for declines. According to Redfin, the median sale price of a home in the town was $420,000 in April 2023, up 20% year-over-year. During the month, 33% of homes were sold over asking price.
In West Hartford, Connecticut, a home sold in March for a second time since the onset of the pandemic in 2020, with the price higher than the previous sale on both occasions, according to CT Insider, a local news website. The house with a pool ended up selling for $875,000, some $75,000 more than the asking price, the website showed.
While mortgage rates have steadied this year, they remain at lofty levels above 6%, a level that far exceeds those paid by six in every seven US residential borrowers, per Redfin data. That means buyers will need a lot more cash, and even more patience.
“The good news is that buyers are out there, trying to find a seat in a game of musical chairs,” Marr said. “The bad news is there aren’t enough chairs.”
