The run-up in housing prices over the last two years has been well documented. As large numbers of people stopped renting and bought homes during COVID-19 lockdowns, prices rose and supply diminished. Housing inventory has remained low as construction rates fell dramatically following the 2008 recession.
But there’s some indication that inventory is growing, according to data from Realtor.com. While available supply was 12% lower in April year-over-year, that’s the smallest such decline since the end of 2019. Market observers say supply is increasing because fewer mid-sized family homes are going under contract during the busy spring homebuying season.
Rising Rate Environment
With homes remaining on the market longer, and the pace of home sales potentially slowing, it seems rising mortgage rates are the likely reason. Since January the average rate on a 30-year fixed mortgage has risen by more than 2.5%. Home prices are also at historically high levels, so would-be buyers are increasingly priced out of the market.
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Lenders explain around 25% of potential mortgage borrowers have found themselves priced out by rising rates. Some real-estate agents say this is all having a gradual effect and is bringing back some “sanity” to the market, including fewer bidding wars.
The formula toward increased housing inventory is simple: fewer buyers and more sellers. There’s some indication would-be buyers could end up staying on the fence. A Gallup survey found 70% of Americans consider now a “bad time” to buy a home, which is the highest number since the question was first asked by the polling organization in 1978.
On the selling side, the process may take longer. Real-estate agents explain many clients have unrealistic expectations when it comes to their house’s value, given how much prices have risen. In 95% of US housing markets, homes are less affordable than their historical averages. Would-be buyers still face an uphill battle, but if nothing else there are some signs inventory may be moving in the right direction.
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