Number of homes for sale jumps 12.5% in one month as it ‘now becomes a buyers market’
The number of homes that have been on sale for 30 days or more is up as much as 60 percent in some areas, with a 12.5 percent increase in July from last year, as experts say the US is shifting to a buyer’s market.
According to a new Redfin report, about 61.2 percent of homes for sale have remained on the market for at least 30 days, up from 54.4 percent in July 2021.
Auckland was among the major cities with the most homes on the market compared to last year, at 60.7 percent; Phoenix by 54.4 percent; Austin with 50.9 percent; Fort Lauderdale, Florida was the only city that saw a 0.9 percent decrease.
Economists at Redfin said homes have stayed on the market for longer due to the housing market’s response to increased mortgage rates and federal interest rates, causing buyers to slow down and examine their options.
“Buyers can take their time making accurate decisions about homes without worrying so much about bidding for wars, bidding and waiving contingencies,” Taylor Marr, Redfin’s deputy chief economist, wrote in the report.
It’s a different story for sellers, who have spent the past two years hearing about their neighbors’ homes getting multiple offers on the day they start selling. Now they need to cut prices and get back to the basics of selling a home, like organizing and beautifying the drawing, to get buyers’ attention.
The turnaround comes after massive rate hikes by the Federal Reserve since May, with the market not fully responding to the latest hike at the end of July as the central bank says additional increases are expected this year in order to combat inflation.
Oakland, Phoenix and Austin saw the largest increases in old stock over the past year, with Fort Lauderdale, Florida, the only major city seeing a decrease in July. Pictured: Cities with the most homes on the market that stayed longer than 30 days last month
The number of homes sold for 14 days, 30 days, and 60 days or more rose for the first time since the start of the pandemic.
What Home Buyers and Sellers Need to Know: How the Fed Affects Mortgage Rates
The Federal Reserve does not set mortgage rates.
When you hear about a “rate hike” by the Federal Reserve, it means that it raised the target range for the federal funds rate.
In July, the Fed raised its target by 0.75 percent to 2.25-2.5 percent. This was the fourth in a series of hikes that began in March.
Changes in the federal funds rate affect borrowing costs across the economy, particularly in the housing market.
When the Federal Reserve raises its target interest rate, mortgage rates usually follow.
Mortgage lenders determine borrowing costs based on expectations of inflation and interest rates.
Both are high now, so we’ve seen mortgage rates go up as well.
The average 30-year fixed-rate mortgage averaged 3.3 percent in the first full week of 2022, according to the Mortgage Bankers Association. By May, it had risen to 5.36 percent.
Expect it to continue to rise as the Fed continues to rise.
July 2022 marks the first annual increase in the supply of ‘stale’ housing since the start of the pandemic, with Redfin identifying older homes that have been on the market for at least 30 days without entering into a contract.
It’s also the second largest increase in a decade, only being offset by a 13.9 percent increase in April 2020, when the housing market stalled due to COVID.
Redfin also found that the number of homes for sale for more than two weeks and more than two months was also up from a year ago, rising by 7.6 percent and 6.8 percent, respectively.
The supply of stale housing comes after a year of sellers favour, as competition was high and homes were off the market. In July 2021, the model home was contracted out in just 15 days, according to Redfin.
The race to buy a home has been mostly driven by low mortgage rates and the Federal Reserve’s near-zero interest rate cut amid the pandemic.
The average 30-year fixed-rate mortgage was just 3.3 percent in the first full week of 2022, according to the Mortgage Bankers Association.
Those conditions have since reversed, with the Federal Reserve raising interest rates by near-record percentage points in order to combat rampant inflation, which reached 9.1 percent in July.
With interest rates on the rise, mortgage rates followed suit, reaching nearly 6 percent in July before easing at around 5 percent as of August 4.
Christopher Jones, a Redfin real estate agent based in Houston, Texas, confirmed that the market has undergone a complete transformation.
“The market has turned 180 degrees from early spring to late spring, with buyers dropping off due to higher mortgage rates,” he said.
“A lot of sellers tell me they feel they have missed the opportunity to enter the hot market.”
The average 30-year fixed rate mortgage was about five percent as of August 4, marking its second week of decline despite the Fed’s rate hike.
Federal interest rates have been cut to nearly zero to help the country during the coronavirus pandemic. The Fed began raising interest rates in March 2022
US inflation hit a 41-year high of 9.1% in June
Old inventory saw the biggest increase in Oakland, California, where the number of homes for sale that stayed on the market for 30 days or more increased 60.7 percent from a year ago.
In Phoenix, old stock is up 54.4 percent since 2021, and in Austin, it’s up 50.9 percent.
Other major cities that made up the top ten were Anaheim, California, with 49.7 percent. Riverside, California, 46.7 percent; Fort Worth, Texas, 43.4 percent; Dallas 42.9 percent, Washington 42.5 percent, Sacramento, California 41.7 percent; and Seattle with 41.3 percent.
Fort Lauderdale, Florida, was the only major U.S. city that saw a decline in old stock, seeing a decline of nearly 1 percent.
Experts said the slight increase in old stock is likely to stabilize soon and better reflect what the housing market was like in the pre-pandemic era.
Johns said he repeats this to his clients: “I’m reminding potential sellers that we’re not in a housing meltdown. It’s a correction.”
If sellers register their home for a slightly lower price than they would have five months ago, they are still likely to get a solid bid.
My advice to buyers is to remember that 5 percent rates are not the end of the world; They can always refinance in the future if prices fall.
The lack of affordable options is driving down home sales in the United States. The fastest decline in newly suspended sales from May to June occurred in San Jose (-24.3 percent), Seattle (-23.9 percent) and Salt Lake City (-20.8 percent)
The largest proportion of home sellers in the United States live in the South (39 percent), followed by the Midwest (23 percent) and the West (22 percent). The smallest share lives in the Northeast (15 percent). Historically, the south has more home building and inventory than other regions
The shift to a buyer’s market is expected to lower home prices across the US, with Redfin and Zillow noting that the drop will be felt in places where the hottest markets have been.
Redfin expects Riverside to have the greatest chance of seeing its housing market cooler if the US enters a recession.
Second on their list is Boise, Idaho, followed by Cape Coral, Florida. Northport, Florida; Las vigas; Sacramento. Bakersfield, CA; Phoenix. Tampa, Florida; Tucson, Arizona.
A recent report from Zillow showed competition in hot markets such as, San Jose; San Francisco; Seattle. and San Diego – all among the five most expensive cities in California.
Salt Lake City at 24.1 percent, Sacramento 21.7 percent and Phoenix 20.4 percent had the highest share of price cuts.
Nationally, house price increases slowed for the third consecutive month in June. Zillow attributes “affordability hurdles” as the likely reason behind this.
Zillow also found that most sellers were listing homes in the South, which makes up 39 percent of the market, the Midwest follows 23 percent, and the West comes in third at 22 percent.
Sellers in the Northeast made up only 15 percent of the market.