According to a new report from Redfin, the total number of U.S. homes for sale dropped 6% from a year earlier during the four weeks ending June 11. That is the biggest decline in 13 months.
New listings dropped 23%, continuing a 10-month streak of double-digit declines. Those add to the deepening post-pandemic inventory shortage; there are 39% fewer homes for sale now than there were five years ago, in June 2018.
The inventory crunch is partly due to a homebuilding slump that’s lasted for over a decade and partly to mortgage rates falling to record-low levels during the pandemic, then shooting up. Mortgage rates have more than doubled since 2021, landing at close to 7% this week.
Pending home sales are down 17% year over year, the biggest decline in over four months, but it isn’t all due to a lack of demand. People are still showing interest in buying. Mortgage-purchase applications rose 8% over the last week.
A fair amount of pent-up demand exists, and many buyers will be ready to pounce when more homes hit the market. Demand outpacing supply is preventing home prices from falling drastically: The median sale price is down just 1.1%, which is the smallest annual decline in three months.
The latest inflation report shows that price increases have continued to cool, and the Fed announced that it will pause interest-rate hikes this month after nearly a year of increases but may hike a couple more times this year.
“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,” says 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.”
Some key indicators of homebuying activity:
- The daily average 30-year fixed mortgage rate was 6.95% on June 14, down from a seven-month high of 7.14% three weeks earlier but up from about 6.6% a month earlier.
- The median asking price of newly listed homes was $398,475, up 0.3% from a year earlier.
- The average sale-to-list price ratio was 99.9%. That means homes are selling for almost exactly their asking price, on average. That’s the highest level since August but is down from 102.3% a year earlier.