Elevated mortgage rates are prompting many homeowners to stay put, resulting in bidding wars as buyers compete for a small pool of homes, according to a new report from Redfin.
However, Redfin added that buyers and sellers can take a degree of comfort in knowing the Federal Reserve probably won’t raise interest rates again anytime soon.
“While a pause in Fed rate hikes doesn’t mean a significant drop in mortgage rates is coming, it does at least alleviate one layer of uncertainty in the housing market,” Redfin Economics Research Lead Chen Zhao said in a release. “Unexpectedly bad inflation data, more banking turmoil or failure to raise the U.S. debt ceiling could throw a wrench in the Fed’s plans, but homebuyers and sellers can feel a little more confident that mortgage rates won’t skyrocket again.”
For now, homes are getting snatched up quickly as a shortage of listings sparks bidding wars between the buyers who remain in the market despite elevated mortgage rates.
Nearly half (48 percent) of homes that sold during the four weeks ending April 30 went under contract within two weeks, down from 51 percent a year earlier but up from 46 percent a month earlier. While that jump may seem small, it’s notable because the share of homes selling in two weeks typically falls in April after peaking in March, according to Redfin.
Redfin agents say reasonably priced homes in desirable areas are selling especially quickly as buyers compete for a limited number of homes for sale. New listings in April were down 23 percent from a year earlier, the second biggest decline since the start of the pandemic. That outpaced the 17 percent year-over-year decline in pending sales, a gauge of how many buyers are in the market.
“I received five offers on a house that I listed on Thursday,” Los Angeles Redfin Premier agent Lindsay Katz said. “One of my other sellers got a full-price offer on her $1.15 million home but had to cancel the listing because with prices and rates so high and inventory so low, she couldn’t find another home she could afford. She wouldn’t even qualify to buy her own home anymore.”
The total number of homes for sale has steadily declined over the last month, going against the typical spring inventory bump. That’s because buyers are draining the supply of homes for sale faster than sellers are filling the sink with new listings. New listings and pending sales did both rise on a month-over-month basis in April, which is typical for springtime, Redfin said.
“A lot of homeowners are just now expressing interest in selling, whereas in a typical year that would have happened a month or two ago,” said Steve Centrella, a Redfin Premier real estate agent in Washington, D.C. “Some sellers are coming forward because they’re noticing there are buyers out there, in spite of high rates. A lot of them are sellers who aren’t also buyers, like people listing a second home or rental property. They’re not as hesitant to give up a low mortgage rate because they’re not turning around and taking on a higher one.”