Home Sellers Reluctant to Sell Despite High Demand in the US Housing Market
The US real estate market has failed to meet the high demand for homes as sellers are hesitant to sell their properties. According to data from Redfin, new listings of homes fell by 20% in March compared to the same period last year, and nearly 30% below pre-pandemic levels. At the same time, the active inventory of homes for sale is 60% higher than last spring, but only because homes are taking longer to sell, sitting on the market for an average of 54 days.
Lack of Homes Affects US Home Sales
The lack of available homes is set to negatively affect home sales in the coming year as buyers have few options. The supply of active listings for sale increased by nearly 60% in March compared to the same period last year, but it is still nearly 50% lower than pre-pandemic levels. Newly listed homes decreased by 20% compared to March 2022 and fell by 15.9% last month. Only three markets in the top 50 experienced inventory declines on a year-over-year basis: Milwaukee, Hartford, and New York City.
Signs of Slowing Down in US Home Prices
Despite high demand, real estate listing prices in the US reached a median of $424,000 in March, down from an all-time record high of $449,000 in June. Danielle Hale, Realtor.com Chief Economist predicts that prices will likely decline relative to the previous year by summertime. One reason for this slowdown is the doubling of mortgage rates over the past year, making home buying more expensive. Higher mortgage rates are also forcing sellers to lower their asking prices and adjust to softer market conditions.
Home Shoppers Sensitive to Mortgage Rates
Home shoppers are sensitive to mortgage rates and may only jump back in the market when rates dip. In early March, mortgage rates dropped slightly but are now moving higher again, although not quite as high as they were last fall. Some sellers are removing their listings from the market or lowering their prices to attract offers. List prices in March were down in Austin and Las Vegas, two markets that were particularly popular with transplants in the first years of the pandemic.
Potential for an Economic Recession
Home prices may continue to stagnate and dip further given the higher interest rates and potential for an economic recession. The number of new listings fell by 20.1% in March compared to the same month last year. More buyers are entering the market but not at the same levels as before, especially due to the fewer choices available on the market and still-rising home prices.
Spring Housing Market Active but Uncertain
The spring housing market is active, and what happens with rates this season will likely determine whether the housing market bumps along or picks up speed this year. It is uncertain whether home prices will continue to fall or stabilize in the coming months.
In conclusion, the US real estate market is experiencing a significant slowdown due to a lack of available homes for sale as sellers hesitate in a highly competitive seller’s market. Home prices have been decreasing for the past seven months and may continue to decline with the potential for an economic recession and rising interest rates. As home shoppers remain sensitive to mortgage rates, it remains to be seen what will happen with rates this season, which will likely determine whether the housing market picks up speed this year or not.
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