The recent rise in mortgage rates caused some buyers to stay away from the market, causing a rapid increase in housing inventory. This is helping to ease an acute shortage of housing inventory, but affordability remains a problem for house-hunters due to rising rates and record high asking prices.
According to a Realtor.com report, active home listings increased at an annual rate 18.7% in June relative to one year ago -- the fastest pace since 2017. It said that some buyers are priced out of the market and homes are being left on the market longer, which eases the inventory crunch.
Many Americans desired to relocate or move into larger homes during the pandemic. However, new construction was slow due to supply and labor issues. Faced with an inventory block, buyers offered all-cash deals and waived contingencies in order to get the best deals. This drove housing prices to new heights. Although inventory is starting to ease, mortgage rates and prices continue to climb.
Danielle Hale, a Realtor.com analyst, stated that "you had a perfect storm in which demand was high and supply was tight." This resulted in a drop in the number of homes available for sale and a rise in prices.
However, the housing inventory is still well below its pre-pandemic level. The number of active listings is still down by 34.1% and 53.2% respectively compared with June 2020 and June 2019.
Hale stated, "Over the past three years we've seen the number homes for sale shrink."
According to Freddie Mac, the average mortgage rate for a 30-year fixed-rate loan was 5.7% as of June 30, and has been steadily rising since then. Comparatively, the 30-year mortgage was only 3% one year ago.
The median asking price for sellers rose to $450,000 in June -- almost 17% more than a year ago.
The surge in demand was the main reason for shrinking inventory. New households formed at a faster pace than new homes were being built. Hale stated that "Building and Construction weren't keeping up with the pace."
According to Realtor.com, 5.8 million households were created in 2022 than single-family homes.
This shortage was made worse by the building constraints that existed at the start of the pandemic. These were caused by labor shortages, and difficulties obtaining materials.
This resulted in record-breaking mortgage rates, which made it financially easier for buyers to buy homes.
Good news: The number of homes available for sale is growing, which gives homebuyers more options and increases competition among sellers.
Hale stated that when there is more demand and less supply, the housing market is rebalancing. That's why we are witnessing the number of homes on the market rise.
However, many Americans still lack the means to own a home, especially as mortgage rates continue rising, which drives less-wealthy families off the sidelines.
The 30-year fixed rate mortgage was at 6% in June, the highest level since 2008's recession.
Hale stated that "it's tempered positive news." It is great for buyers who are able to keep their home search moving despite any obstacles. However, it could mean that some buyers will be looking for a rental property rather than a home.
According to Realtor.com, the top five cities with active listings are Austin, Texas, Charlotte, North Carolina; Dallas, Las Vegas; Nashville, Phoenix; Oklahoma City, Orlando, Florida, and Raleigh, North Carolina.
If homeowners are considering listing their property, they should be aware of the current housing market and monitor local pricing trends. Hale stated that homeowners need to ensure the asking price is not too high or too far ahead of the market.
Although buyers have more options this year than last, the market is still competitive. Hale stated that buyers still want to make strong offers to maximize their chances of success. They should be aware that they have many more options than they did last year.
