More home sellers are sitting out of the spring housing market

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A for sale sign is posted in front of a home for sale on February 20, 2023 in San Francisco, California.

Justin Sullivan | Getty Images

It seems like a good time to put your home up for sale. Buyers are flooding back into the market, mortgage rates have fallen from their recent highs, and there are still far too few homes for sale to meet demand. But potential sellers don’t budge.

New listings continued to decline in March, down 20% from the same month last year, according to Realtor.com. This drop in new registrations exceeded February’s 16% drop. New listings in March were almost 30% below pre-pandemic levels.

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However, the active inventory of homes for sale is 60% higher than it was at the start of last spring, but that’s only because homes are taking longer to sell. Stock is also half what it was at the start of spring 2019, before the Covid pandemic caused an unprecedented rush in the housing market.

Homes are now on the market for an average of 54 days, down from an average of 36 days early last spring. Time to market was longer in all top 50 metropolitan markets, but the biggest gains were in Raleigh, North Carolina (up 42 days), Kansas City, Missouri (up 37 days) and Austin, Texas (up 37 days).

“With fewer new listings on the market and home prices still rising, homebuyers have shown that they are very interest rate sensitive and will only bounce back into the market when interest rates fall, and therefore what is happening to interest rates this spring will are likely to play a large role in determining whether the housing market will move forward or pick up steam this year,” said Danielle Hale, chief economist at Realtor.com.

Mortgage rates fell slightly in early March due to the strain on the banking system from bank failures. In the meantime, however, they are rising again, albeit not quite as high as last autumn. According to Mortgage News Daily, the average interest rate on 30-year bonds is now 6.61%, just about 2 percentage points higher than a year ago.

At a recent open house in the Cleveland suburbs, homebuyers Vince and Katie Berardi said they were concerned the market was still overpriced. The sellers of the three-bedroom home they were viewing had just reduced the price from $450,000 to $350,000. It already had several offers on it.

“There’s not as much competition as there used to be,” said Katie Berardi, who is pregnant with the couple’s second child. “But if there’s a good one on the market, it’s gone in a week.”

Across the country, home prices started this year higher than they started last year, but they’ve fallen over the past seven months, according to S&P Case-Shiller. In January, the last reading of this index, prices were lower in some of the local markets that were previously among the hottest, such as Seattle and San Francisco. In Phoenix, another market where prices had risen, prices are now flat. Other markets, particularly in the South like Atlanta and Miami, are still posting big gains.

According to Realtor.com, March list prices were down in Austin and Las Vegas, two markets that were particularly popular for transplants in the early years of the pandemic.