Skyrocketing Real Estate prices and elevated interest rates are significantly impacting the housing market, with many potential buyers opting to stay on the sidelines. This trend has resulted in over 60% of homes listed in May remaining on the market for at least 30 days, according to a report by real estate brokerage Redfin.
The current average 30-year fixed mortgage rate is 6.99%, which is more than double the lows experienced during the pandemic. Although this rate is slightly below the 20-year high of 7.8% reached in October 2023, it remains a significant barrier for many potential homebuyers. The median U.S. monthly housing payment is now approximately $30 less than its record high, further underscoring the financial burden on buyers.
Since March, there has been a noticeable increase in the proportion of homes remaining unsold for at least a month. This trend began when the number of new listings surged, but buyer demand remained weak, a pattern that has persisted since mortgage rates began to rise in 2022. As a result, many less desirable listings are not finding buyers, contributing to the increasing inventory of stagnant properties.
In May, two out of five listings remained on the market for 60 days or more without going under contract. This figure is consistent with the same period last year and represents a significant increase from 27.8% two years ago. Despite the prolonged time on the market for many homes, demand still outstrips supply, which keeps prices elevated.
According to Rick Arvielo, head of mortgage firm New American Funding, house prices are unlikely to decline due to the persistent inventory shortage. “You’re not going to see house prices decline,” Arvielo told Bankrate. “There’s just not enough inventory.”
In April, the median home price in the U.S. was $407,600, which, although lower than the all-time high of $413,800, remains the highest April median on record, according to the National Association of Realtors (NAR). Lawrence Yun, the NAR Chief Economist, supports this outlook, stating that prices will remain firm and will not decline on a national level.
The trend of growing inventory lingering on the market is particularly evident in cities like Dallas, where over 60% of homes listed in May had been on the market for longer than 30 days, up from 53% a year ago. Similarly, three Florida metro areas have seen significant increases in the proportion of long-listed homes. In Fort Lauderdale, 75.5% of listings remained on the market for longer than 30 days, up from 68.2% the previous year. In Tampa, the figure rose to 68.7% from 61.9%, and in Jacksonville, it increased to 69.2% from 62.9%.
Redfin attributes the rapid growth in stale inventory in Texas and Florida to two primary factors: the extensive homebuilding activity in these states and the growing concerns among homebuyers about the increasing prevalence of natural disasters. Texas and Florida are building far more homes than any other states in the country, contributing to the rising supply. However, the fear of natural disasters, such as hurricanes and flooding, is causing some potential buyers to hesitate, further slowing the market in these regions.
The combination of high prices, elevated interest rates, and a surge in new listings has created a challenging environment for homebuyers and sellers alike. For buyers, the financial barriers are significant, while sellers face the difficulty of moving their properties in a market where many homes remain unsold for extended periods. Despite these challenges, the overall lack of inventory continues to prop up prices, suggesting that the market may remain in a state of flux for the foreseeable future.
In conclusion, the current housing market is characterized by high prices and elevated interest rates, which are keeping many buyers at bay and leading to an increase in the number of homes that linger on the market. While some regions, like Texas and Florida, are seeing a rapid growth in stale inventory due to extensive homebuilding and concerns over natural disasters, the overarching trend is one of sustained high prices driven by a persistent inventory shortage.
