According to a report from Redfin, limited inventory and elevated mortgage rates continue to suppress U.S. home sales during the typically busy spring homebuying season.
This week’s inflation report shows a slight slowdown in price gains, confirming that mortgage rates are liable to stabilize for the next several months. The Federal Reserve’s interest-rate hikes are working as intended to ease inflation, albeit slowly, making a hike or cut to interest rates less likely at its June meeting.
New listings of homes for sale dropped 19% year over year during the four weeks ending May 7, contributing to an unseasonal monthly decline in total inventory.
There were 16% fewer pending home sales than a year earlier, reflecting the lack of listings and the group of would-be buyers who have been priced out by 6%-plus mortgage rates and record-high monthly payments.
Despite the inventory crunch, pending sales have increased over the last week, as is common this time of year. Additionally, mortgage-purchase applications are up 5% on a seasonally adjusted basis. Nearly half of the homes that do sell are selling within two weeks. That share has increased over the last month, which isn’t typical for this time of year.
“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,” says Taylor Marr, Redfin’s deputy chief economist. “The good news is that buyers are out there, trying to find a seat in a game of musical chairs. The bad news is there aren’t enough chairs.
“A lot of potential home sales are locked up until mortgage rates come down to a level for which current owners would be willing to trade in their 3 percent rate,” says Marr. “The problem is that’s unlikely to happen anytime soon.”
While a shortage of listings and few but fast-moving sales characterize the U.S. housing market as a whole, each metro area is unique.
Some leading indicators of homebuying activity include the following:
- For the week ending May 11, the average 30-year fixed mortgage rate was 6.35%, down slightly from 6.39% the week before. That’s the second straight week of rates inching down. The daily average was 6.57% on May 10;
- Mortgage-purchase applications during the week ending May 5 increased 5% from a week earlier, seasonally adjusted. Purchase applications were down 32% from a year earlier;
- Google searches for “homes for sale” were little changed from a month earlier during the week ending May 6, and down about 15% from a year earlier;
- Touring activity as of May 6 was up 26% from the start of the year, compared with a 14% increase at the same time last year, according to home tour technology company ShowingTime;
To view the full report, including charts, please click here.