The supply of homes for sale jumped 9% last week compared to the same period last year, according to Realtor.com. This is the largest annual gain the company has recorded since it began tracking the scale in 2017.
Real estate brokerage Redfin also reported that new listings nearly doubled in the four weeks ending May 15 As they did during the same period a year ago.
A sign for sale is displayed in front of a house in Washington, DC.
Stephanie Reynolds | Afp | Getty Images
“Rising mortgage rates have transformed the housing market, and now home sellers are scrambling to find a buyer before demand weakens further,” said Daryl Fairweather, chief economist at Redfin.
Sellers are clearly seeing the market decline. Pending home sales, a measure of contracts signed for existing homes, fell about 4% in April from March. It’s down just over 9% from April 2021, according to the National Association of Realtors. This indicator measures contracts signed on existing homes, not closings, so it is perhaps the most timely indicator of how buyers are reacting to rising mortgage rates. It marks the sixth consecutive month of declining sales and the slowest pace in nearly a decade.
Sales of newly built homes in April, also measured in contracts signed, fell by a much larger-than-expected 16% compared to March, according to the US Census.
Sales are slowing because mortgage rates have risen sharply since the start of the year, with the biggest gains coming in April and early May. The average 30-year fixed-rate mortgage per year started near 3% and is now over 5%.
“We used to get 10 to 15 offers on most homes,” said Lindsay Katz, a Redfin realtor in the Los Angeles area. “Now I see between two and six offers on a house, a good house.”
Katz worked with Alexandra Stoker and her husband to sell their home. The Stockers were already worried that the overheated housing market was suddenly chilling.
“We talked about it a lot. Like, are we making a mistake here? Did we lose the boat? Is everything going to fall apart in the next three months and we’re going to kick ourselves for not selling our house earlier this year?” Alexandra Stoker said.
While home prices rose steadily during the first two years of the Covid pandemic, lower mortgage rates have largely offset these increases.
For example: In May 2019, a buyer who buys a $300,000 home with a 20% down payment and a 30-year fixed mortgage will receive an average interest rate of about 4.33%. The monthly payment of principal and interest will be $1,192. In 2020, that same home was 5% more expensive, but mortgage rates dropped to 3.41%, so the monthly payment actually dropped to $1,119.
By 2021, the monthly payment has only gone up by about $100. This month, with prices up another 21%, and mortgage rates at around 5.5%, the monthly payment is $1,991 — nearly $800 more per month than it was in 2019.
While home sellers were barely in the driving seat six months ago, they are now seeing much less competition from buyers. Redfin’s Demand Index, which measures requests for home tours and other home-buying services, fell 8% year over year during the week ending May 15. It was the biggest drop since April 2020, when the pandemic halted most home buying activity.
“I met sellers in February who would sell in June, and it was a very different conversation in February than it would in June because the market has completely changed,” Katz said.
Stockers are thrilled that they listed their home when they did. They are relocating from California and building a house in Washington State.
“We joke that we might get out of here, just in time,” Alexandra Stoker said. “I don’t want to wait any longer.”
Correction: Sales of newly built homes in April, also measured in contracts signed, fell by a much larger-than-expected 16% compared to March, according to the US Census. A previous version missed a month.