- The current housing market offers 39% fewer homes for sale than pre-pandemic, Redfind said.
- In the four weeks to June 11, the total number of US homes for sale saw the biggest decline in 13 months.
- Homeowners are unwilling to part ways with low mortgage rates secured before borrowing costs went up.
The housing market has 39% fewer homes for sale compared to before the pandemic, according to a Thursday Redfin report.
The issue is unlikely to ease anytime soon, as the total number of homes for sale dropped 6% year over year in the four weeks leading up to June 11, the report said, marking the largest drop in 13 months. And new home listings fell 23%, the 10th consecutive month of double-digit declines, amid a slump in homebuilding.
Mortgage rates are now hovering close to 7%, nearly double where they were at in 2021, when ultra-low rates fueled a home-buying boom. And don’t expect much relief, if at all, in the near future, as the Federal Reserve stays hawkish.
“The Fed’s indication that there are more rate hikes to come is not what homebuyers want to hear. It’s likely to keep mortgage rates elevated and may even push them up a bit,” said Redfin Economics Research Lead Chen Zhao. “People who are sitting on the sidelines, waiting for mortgage rates to decline, should know that’s unlikely to happen in the foreseeable future. If a home that’s in your price range and has everything on your wishlist hits the market, there’s no good reason to wait.”
High mortgage rates have discouraged homeowners from selling or moving so they can hold onto lower payments, Redfin said. In fact, a separate Redfin report found that 91.8% of homeowners in the US have mortgage rates below 6%.
These numbers are the primary reasons behind the tight inventory, in Redfin’s view, and the lack of options for buyers could mean the home-price bubble will keep growing.
To be sure, there’s still demand on the market. Mortgage-purchase applications climbed 8% over the last week, and Redfin’s Homebuyer Demand Index — which measures requests for tours and agent services — is near its highest mark in a year.
But since demand is outpacing supply, home prices have yet to meaningfully fall.
Edward Seiler, the associate vice president for housing economics at the Mortgage Bankers Association, told Insider earlier that the housing market has never been this unaffordable for new buyers. The group’s Purchase Applications Payment Index hit a record high in June, suggesting a sharp deterioration in borrower affordability conditions.
“For new home buyers, this is the worst situation since the end of the Great Recession,” Seiler said.
