A house is for sale in Chicago, Illinois.
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One of the leanest real estate markets in history could gain some weight. The supply of homes for sale could increase in the coming weeks, according to new data from Realtor.com.
In April, inventories were 12% lower than the same month last year, the smallest year-on-year decline since the end of 2019. Another measurement just for the last week of April shows inventories were only about 3% lower than a year earlier.
“April data suggests there is a positive turn in events on the horizon for weary shoppers: if the trends we are seeing now play out, we could potentially see annual inventory growth over the next few weeks,” said Danielle Hale , Chief Economist for Realtor.com.
The shift in supply is likely due to a slower pace of sales stemming from the recent rapid rise in mortgage rates, which has made expensive homes even more expensive. The average interest rate on the 30-year fixed bond has risen by more than 2.5 percentage points since the beginning of the year.
New listings in April fell 0.9% year-on-year, and the number of active listings is still 67% below pre-pandemic levels. Supply growth is being led by medium-sized family homes as fewer deals are being signed despite it being the spring market, a popular time for families to buy homes.
Higher mortgage rates combined with record home prices have sidelined much of the competition. Home prices have risen about 34% since the pandemic began. According to Realtor.com, the monthly mortgage payment for a $400,000 home with a 20% down payment is now $467 more than it was in March 2020.
These factors result in fewer potential buyers and a slowdown in bidding wars.
“Sensibility seems to be returning,” said Paul Legere, a buyer at the Joel Nelson Group in Washington, DC.
“The 25% reduction in buyers gives us some sanity, but it’s still difficult for less-than-heavy buyers,” Legere said. He said the million-dollar market is still “alive.”
The typical home has been on the market for just 34 days, down six days from a year ago, which surpassed the previous record low of 36 days set in June 2021, according to Realtor.com. Fastest year-over-year homes sold in the following markets: Miami, St. Louis, Raleigh, Orlando, and Hartford.
While it’s not one of the fastest-moving markets, offers in the Boston area are still strong, even in the luxury sector, said real estate agent Dana Bull of Sotheby’s International Realty.
“Prices haven’t cooled down yet, but some sellers have unrealistic expectations about the price. There will be some tough talks ahead of the listing to set expectations with sellers,” Bull said. “Even though stocks are rising, buyers are still coming out of the woods and committing to land homes, so new stock and new demand are in lockstep seem to be increasing.”
The key to inventory growth will be fewer buyers and more sellers, but affordability conditions aren’t exactly conducive to that. According to recent calculations by Black Knight, a mortgage technology and data provider, homes in 95% of the US housing markets are now less affordable compared to their historical averages.
Another Gallup poll found that about 70% of Americans say now is a bad time to buy a home. That’s the highest percentage since the polling firm began asking the question in 1978.
“The next eight weeks will be critical for both buyers and sellers as this is crunch time,” Bull said. “Buyers now want to secure homes and sellers want to capitalize on peak demand.”