The traditionally hot spring homebuying season didn’t come to fruition in 2023, according to a new report from Redfin.
This year, instead of the calendar determining the homebuying season, the Federal Reserve is dictating when people buy and sell. And so far, the Fed’s actions are suggesting they wait.
Pending home sales fell 16 percent from a year earlier during the four weeks ending June 18, according to the report. But even though sales are relatively tepid, Redfin’s Homebuyer Demand Index is up 11 percent year-over-year. Additionally, there are more house hunters than there are homes hitting the market. New listings of homes for sale are down 24 percent from a year ago, and the total number of homes for sale is down 8 percent, the biggest drop in over a year.
Elevated mortgage rates are responsible for the drops on both the demand and supply sides, according to Redfin. With average rates sitting above 6 percent all spring, pushing the typical U.S. monthly housing payment up near record highs, many would-be buyers are sitting on the sidelines, waiting for rates to come down. And the buyers who are out there are having a hard time finding listings, with many prospective sellers staying put, hanging onto their relatively low rates: Nearly all homeowners with a mortgage have a rate below 6 percent, according to Redfin.
The continuing inventory shortage is bolstering home prices. The median U.S. home-sale price dropped just 1 percent year-over-year this week, the smallest decline in more than three months. On a local level, prices have started leveling off: They fell in 25 of the 50 most populous metros, compared with 29 a month ago. In San Jose, Calif., for instance, the median sale price is up roughly 2 percent year-over-year, marking the first increase after eight straight months of declines.
“There are two things that would jumpstart the housing market; a big drop in mortgage rates and/or a big surge of new listings,” Redfin Deputy Chief Economist Taylor Marr said in a release. “Neither of those things happened this spring; instead, rates rose and new listings dropped to record lows. And with one or two more interest-rate hikes expected this year, mortgage rates are likely to remain elevated at least through the summer, continuing to limit both demand and supply.
“But even though there wasn’t much of a spring homebuying season this year, there was a spring building season. That means there’s hope for more listings somewhat soon, with homebuilders working to fill the inventory bucket. Builders broke ground on more single-family homes in May than almost any month in nearly two decades, which could expand buyers’ options by the end of the year.”