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More and more homeowners are putting their homes up for sale, but the property is taking longer to sell because potential buyers are faced with high prices and interest rates.
According to Zillow's latest market report, the number of new listings from home sellers jumped in May, up 13% from the previous year.
“There are more and more sellers returning to the market,” said Orphe Divounguy, a senior economist at Zillow.
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But with buyers not returning to the market, many new listings are becoming just inventory. The number of homes on the market is up 22% from last year, Zillow found.
“Homes are staying on the market a little longer because sales are not keeping pace with the influx of new homes,” Divounguy said.
“The market is slowing down”
Nearly two-thirds, or 61.9%, of homes listed on the market in May were for sale for at least 30 days without a sales contract being signed, according to a new analysis from Redfin. About 40.1% of homes listed for sale in May were for sale for at least two months without a sales contract being signed, Redfin found.
“The market is slowing down. It's taking longer to sell homes, and that's causing inventory to pile up on the market,” said Daryl Fairweather, chief economist at Redfin.
But despite the recent jump in supply, “we still lack inventory in the home for sale market,” Divounguy said. According to Zillow, U.S. housing inventory is still 34% below pre-pandemic levels.
“We are missing about 4.3 million housing units nationwide,” he said. “We still have a deficit of housing units.”
Homebuyers are waiting for lower mortgage rates
With mortgage rates remaining high and housing affordability weighing on household finances, buyers were unable to enter the market, Divounguy explained.
“Buyers are facing these incredibly high mortgage rates, at least compared to rates during the pandemic,” said Fairweather, who believes homebuyers may lack the motivation and financial means to purchase a home.
The interest rate on 30-year fixed-rate mortgages in the U.S. fell to 6.95 percent on June 13, down from 6.99 percent the previous week, according to data from Freddie Mac via the Federal Reserve.
While mortgage rates could change “pretty quickly” or “in the blink of an eye,” Fairweather said, buyers are unlikely to see major changes in the near future. The Fed left rates unchanged at its June meeting and now expects only one rate cut this year. Its next meeting is July 30-31.
“For homebuyers deciding whether or not to wait, there is no right answer,” Fairweather said. “It's just a matter of chance as to when mortgage rates will drop. No one really knows when that will happen, so it's hard to plan your life accordingly.”
What to do if you are a buyer or seller?
Some markets in the U.S. are seeing a significant increase in unsold inventory. According to Redfin, about 60.5% of listings in Dallas, Texas, stayed on the market for at least 30 days, up from 53% last year.
In Fort Lauderdale, Florida, the percentage of unsold listings that remained on the market for at least 30 days is 75.5%, up from 68.2% last year, according to Redfin.
A similar increase is also being seen in two other areas of Florida. According to data from Redfin, the percentage of unsold homes in Tampa that have been on the market for 30 days is 68.7%, compared to 61.9% a year ago. In Jacksonville, it is 69.2%, compared to 62.9% during the same period.
“Giving buyers more options means they have more negotiating power,” Divounguy said.
If you notice that homes for sale in your area are staying on the market longer, “there is probably an opportunity [a property] below list price,” Fairweather said.
If you make it to the home inspection and learn of problems that weren't noticed or disclosed during the initial inspection, it may be worth asking the home seller to make repairs, she says.
But don't overdo it: “You shouldn't be picky and demand every single repair,” such as chipped paint, Fairweather said.
Other markets are still favorable for home sellers as supply remains tight, Divounguy said. Many homeowners not only have record equity but also have low mortgage payments.
If a home seller needs to move this year due to upcoming life changes and there are a lot of unsold properties in their area, they may need to be willing to lower their asking price to generate interest.
“Price cuts sell houses,” he said.