New listings of homes for sale dropped 25 percent from a year earlier during the four weeks ending April 9, continuing an eight-month streak of double-digit declines, according to a new report from Redfin.
That’s the biggest drop since the start of the pandemic, but there was a holiday weekend effect: Easter fell a week earlier this year than last year, making the new-listings decline larger than it would have been if Easter had fallen during last year’s comparison period.
People are reluctant to sell because they don’t want to give up their low mortgage rate and it’s hard to find another home to buy, according to Redfin.
Although rates are down from their November peak, the newest weekly average is 6.27 percent; 85 percent of homeowners have a rate far below 6 percent. The bright side for homeowners who are listing now is that desirable, well-priced homes are being snapped up in bidding wars in markets where demand outpaces supply.
New listings fell from a year earlier in all 50 of the most populous U.S. metros, with the biggest declines in California. They dropped most in Sacramento and Oakland (-47 percent year-over-year apiece), San Francisco (-43.2 percent), San Jose (-42.9 percent) and San Diego (-41.4 percent).
The scarcity of homes hitting the market, along with elevated mortgage rates, is holding back sales. Pending home sales dropped more than 30 percent in each of those metros, more than the 19 percent nationwide decline.
While pending sales are down, early-stage homebuying demand is ticking up, with mortgage-purchase applications up 8 percent from a week earlier, seasonally adjusted, Redfin data shows.
Angela Langone, a Redfin agent in San Jose, said there aren’t enough listings to go around, with multiple offers on many homes. Both new listings and pending sales are down more than 40 percent from a year ago in San Jose.
“Many buyers here aren’t held back by high mortgage rates; it’s the lack of inventory that’s really getting in their way,” Langone said in a release. “I have several clients who are serious about buying a home and they’re actively looking, but they can’t find anything right now and they’re waiting for more homes to trickle onto the market.”
Buyers have more options in other parts of the country. In Nashville, Tenn., for instance, new listings and pending sales were both down about 14 percent from a year earlier—but those are some of the smallest drops in the country.
“Inventory isn’t a major problem here because the greater Nashville area is so sprawling, and there are a lot of newly built homes on the market in the suburbs,” Nashville Redfin agent Jennifer Bowers said. “Builders went big in the outskirts of the city over the last few years and now they’re offering incentives to attract buyers, to the point where individual sellers are having a hard time competing. For buyers willing to stray from the city center, there are plenty of homes for sale.”
Two new pieces of economic data serve as tea leaves to anticipate how mortgage rates will trend over the next few months: It’s unlikely they’ll skyrocket, but it’s also unlikely they’ll come down enough to motivate locked-in homeowners to sell. The March consumer-price index and jobs report showed inflation continued to cool and wage growth ticked down from the month before, but inflation is still higher than the Fed’s target.
“The Fed has made some progress cooling inflation with rate hikes but there’s still work to be done,” Redfin Chief Economist Daryl Fairweather said. “Even if the Fed chooses not to hike interest rates next month, which would likely bring down mortgage rates, the limited supply of homes for sale would remain a major obstacle for would-be buyers. Rates dipping below 6 percent would probably pique the interest of more buyers, but enough homeowners have rates in the 3 percent or 4 percent range that we’re unlikely to see a big uptick in new listings.”