Even though inventory has been increasing, many home buyers are still sitting on the sidelines, with some likely waiting for mortgage rates to decrease before they make a purchase, a report from Zillow shows.
According to the firm’s data, new listings have increased nearly 13% since last year. Inventory is accumulating, rising 22% over last year and reducing the pandemic-era deficit.
In addition, home price appreciation slowed in May, and forecasts indicate that prices are likely to ease over the next year.
But as sellers return to the market, some are finding buyers hesitating. New listings of houses outpaced sales in May, allowing buyer competition and price growth to cool.
“Rate lock’s hold seems to be loosening — homeowners who may have put off listing their homes are done waiting,” says Orphe Divounguy, senior economist for Zillow, in a statement. “But just as more choices sprang up for sale, buyers turned on cruise control. Inflation has hit younger households hardest, and stubbornly high rates have pushed a mortgage out of reach for many first-time buyers. That has cooled competition for houses. If these trends hold, we’re likely to see price growth flatten or tick down over the next year.”
New listings from sellers took a larger-than-average step up, rising 8% from April to May.
The effects of “rate lock” — when owners hold onto their existing homes and low-rate mortgages — are weakening over time. A Zillow survey of recent sellers found a large majority (about 80%) were influenced by life events, such as getting married or having a child, and not necessarily by optimal financial conditions.
But buyers aren’t matching sellers’ enthusiasm; sales in May were 6% lower than last year.
This helped partially restock the housing shelves, with the number of homes on the market rising 22% compared to last year’s near record-low level.
Inventory is still 34% below pre-pandemic norms, but that’s the smallest deficit in more than three years.
Photo: Phil Hearing