(Bloomberg) — The U.S. housing market — long crippled by an inventory drought — is finally starting to pick up listings. But now many places are not getting buyers.
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Sellers understand the fact that higher prices usually reduce demand during the peak season of the market. According to Redfin Corp., more of those owners are cutting prices as inventory ages starting in November 2022.
“As mortgage rates have risen above 7%, homebuyer appetite has waned this season,” said Ralph McLaughlin, senior economist at Realtor.com. “You can have high prices or high mortgage rates, but you can’t have both for long.”
The prospect of a Federal Reserve rate cut this year has fueled some optimism for the housing market, which is emerging from the worst year for owner-occupied home sales in nearly three decades. But the economy continued to roar, dampening hopes for an interest rate cut anytime soon.
“Without rate cuts, a cold reality is setting in on the housing market,” said Robert Frick, corporate economist at Navy Federal Credit Union.
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Buyers gain very little from high borrowing costs. The average rate on a 30-year mortgage has been near 7% since mid-April. And the price keeps going up. In the four weeks ending May 26, the median sales price rose 4.3% from a year earlier to $390,613, according to Redfin.
House hunters of all kinds are being pushed out of the market. Sales of new homes — a bright spot for an inventory-constrained market — fell in April. Contracts to buy existing homes fell to a four-year low that month. According to Realtor.com’s McLaughlin, the recession is causing listings to pile up rather than match buyers.
The spring selling season so far has been “definitely a disappointment,” said Lawrence Yun, chief economist for the National Association of Realtors. “At the beginning of the year, I thought sales would increase throughout the year.”
across the country
Although sales in the U.S. are falling on average, geography matters. Sun Belt markets, including Florida and Texas, that were buoyed by the influx of new arrivals during the pandemic are now cooling somewhat as people are priced out, according to Redfin. Meanwhile, metros in the West such as Seattle and the San Francisco Bay Area had sharper corrections in late 2022 and are already beginning to recover.
Contract signings were down at least 14% in Houston, West Palm Beach, Florida and Atlanta, but San Jose, California, saw nearly that amount rise, according to Redfin’s year-over-year data for the four weeks through May 26. Pending sales fell 3.4% nationwide.
Eighteen months ago, homes in the burgeoning suburbs north of Nashville wouldn’t stay on the market for a day, said Don Hackford, a real estate agent in Hendersonville, Tennessee. Nowadays, a developer client recently took two houses off the market after receiving some low-ball offers.
“Everything has stagnated, and it’s frustrating for realtors because it’s like we’re closing,” Hackford said. “Not a single job.”
The number of active single-family home listings in Punta Gorda, a boom area on Florida’s southwest coast hit hard by rising home insurance rates, has more than doubled in the past year to 2,143. Meanwhile, the median sales price of a single-family home fell nearly $30,000 to $351,000 in April from a year ago, said Leanne Walker, a local broker and president of Realtors of Punta Gorda-Port Charlotte-North Port-DeSoto Inc.
“It’s pretty flat,” Walker said. “It’s become very much a buyer’s market. There’s a lot of price gouging going on.
Price growth is likely to moderate more broadly in the coming months, Redfin economist Chen Zhao said. But any decline will likely be slow, given the demand from the millennial generation, which will buoy the market.
“The consensus expectation is that rates will be lower now, bringing more demand and supply and higher transaction volume,” said Redfin’s Zhao. “But instead we continue to hover around the bottom we reached 18 months ago.”
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