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More homeowners are listing their homes for sale, but properties are taking longer to sell as potential buyers face higher prices and interest rates.
New listings from home sellers jumped in May, up 13% from a year ago, according to the latest market report from Zillow.
“There is an increase in the number of sellers returning to the marketplace,” said Urvi Devungi, chief economist at Zillow.
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But with buyers no longer returning to the market, many new listings are only adding to the inventory. Zillow found that the number of homes on the market was up 22% compared to last year.
“Homes stay on the market a little longer because sales aren't keeping up with the influx of homes coming on the market,” DeVonge said.
“The market is slowing down”
Nearly two-thirds, or 61.9%, of homes listed on the market in May had been on the market for at least 30 days without a contract in place, according to a new analysis by Redfin. Redfin found that about 40.1% of homes that were for sale in May had been listed for at least two months without a contract.
“The market is slowing down. It's taking longer for homes to sell, and that's allowing inventory to build up in the market,” said Darryl Fairweather, chief economist at Redfin.
Despite the recent jump in supply, “we're still starving for inventory in the seller's market,” DeVonge said. U.S. housing inventory remains 34% below pre-pandemic levels, according to Zillow.
“We are missing about 4.3 million homes nationwide,” he said. “We still have a housing shortage.”
Homebuyers are waiting for mortgage rates to fall
With mortgage rates remaining high and housing affordability straining household finances, buyers have been unable to enter the market, DeVonge explained.
“Buyers are facing incredibly high mortgage rates, at least compared to where they were during the pandemic,” said Fairweather, who believes homebuyers may lack the motivation and financial ability to purchase a home.
The U.S. 30-year mortgage rate fell to 6.95% on June 13, down from 6.99% the week before, according to Freddie Mac data via the Federal Reserve.
While mortgage rates can “change very quickly” or “quickly,” buyers are unlikely to see much movement in the near term, Fairweather said. The Fed held interest rates steady at its June meeting and now expects to cut rates just once this year. Its next meeting is July 30-31.
“There is no right answer for homebuyers deciding whether or not to wait,” Fairweather said. “It's up to chance when mortgage rates go down. No one really knows when it's going to happen, so it's hard to plan your life around that.”
What to do if you are a buyer or seller
Some markets in the United States are seeing a significant increase in unsold inventory. About 60.5% of listings in Dallas, Texas, stayed on the market for at least 30 days, up from 53% the previous year, according to Redfin.
In Fort Lauderdale, Florida, the share of unsold listings that remained on the market for at least 30 days was 75.5%, compared to 68.2% the previous year, Redfin found.
A similar increase is occurring in two other Florida areas. The share of unsold homes in Tampa that have been on the market for 30 days is 68.7%, compared to 61.9% a year ago. In Jacksonville, 69.2%, up from 62.9% in the same period, according to Redfin data.
“When you give buyers more options, it means they have more bargaining power,” DeVonge said.
If you notice homes for sale being on the market longer in your area, “there's probably an opportunity to get (a property) for less than its listed price,” Fairweather said.
If you go into the home inspection process and identify problems that were not noticed during the initial walkthrough and went undetected, it may be worth asking the home seller to make the repairs, she said.
But don't overdo it: “You don't want to be picky and order every single repair,” such as chipped paint, Fairweather says.
Other markets still favor home sellers as inventory remains tight, Devonjoy said. Not only do many homeowners have record home equity, they also have lower mortgage payments.
If a home seller needs to move this year due to upcoming life changes and their area is seeing high levels of unsold listings, they may need to be prepared to lower their asking price to attract interest.
“Price reductions sell homes,” he said.
