Homebuyers finally heard some good news in June: Home prices fell over the course of the month for the first time in six years. But lest home shoppers feel a little too giddy, a whole new problem has just materialized.
Namely, the number of homes for sale has stopped growing—in fact, it’s shrinking for the first time in over a year.
“Although the decline rounds to zero, this week marks the first time that there were fewer active listings compared to a year ago in more than a year,” notes Danielle Hale, chief economist for Realtor.com®, in her analysis of data for the week ending June 24. “It is notable in that it highlights a key reason why, despite high costs, home prices have not budged much.”
We’ll break down what this latest news and other just-released real estate statistics mean for both homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”
The latest mortgage rate and home price trends
The real estate market seems to be mired in a perpetual battle of good news versus bad news for homebuyers.
In one corner is the drop in typical home prices, which registered 0.9% lower than last year for the week ending June 24. In June 2022, median home prices hit a record high of $449,000, while this June, asking prices sank to $441,000.
“This means that in June 2023, home asking prices registered the first year-over-year decline in our data series, for which trends were available in 2017,” explains Hale, adding that prices have been dropping for three weeks straight.
Meanwhile, mortgage rates ticked up slightly after trending downward for most of June. Rates for a 30-year fixed-rate loan averaged 6.79% on June 1, and for the week ending June 29, the rate sank to 6.71%, according to Freddie Mac.
Why the number of homes for sale is shrinking
While overall inventory slowed for the first time in the week ending June 24, newly listed homes have been tumbling for almost a year, hitting 51 weeks of declines.
New listings were down 29% this week from one year ago, despite a recent uptick in seller confidence.
“Buyers have pulled back from the pandemic-era frenzy as higher mortgage rates have cut into the purchasing power of their housing dollars, but existing home sales have largely steadied and sellers have pulled back even more,” says Hale.
Sellers with locked-in low mortgage rates from years past are understandably unwilling to trade in an affordable monthly payment for a higher one. In fact, 1 in 7 homeowners who are staying out of the housing market this year cited mortgage rates as the reason, so a spike in overall inventory is unlikely anytime soon.
Why the pace of home sales is slowing
The housing market is not only shrinking, but has also been slowing down for a while. Homes lingered on the market for 13 more days for the week ending June 24 compared with last year. This marks 49 weeks it’s taken longer to sell a home compared with the same week a year ago.
Yet, in the big real estate picture, homes are selling faster than the average in June from 2017 to 2019. June 2023 housing data reveals that homes were on the market 43 days—10 days faster than the 2017 to 2019 time frame.
Will the number of homes for sale continue shrinking?
Homebuyers holding out for a surprise windfall of listings in the usually busy summer season will likely get burned.
Based on the current housing market data, Hale expects 2023’s overall inventory to “decline for the year as a whole.”
“An ongoing lack of existing-home sellers as buyers adapt to a higher mortgage rate environment has hampered the inventory recovery,” says Hale.
But in a boon for buyers, there is another path toward homeownership: new homes.
“Market pace varies substantially by local market, and our May Hottest Housing Markets report shows that Northeastern and Midwestern markets have the fastest market pace and greatest buyer interest, even as existing sales in these regions may be held back by tighter inventory,” says Hale. “New-home sales in these regions, however, are climbing.”