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Inventory of homes for sale in May was at its lowest level in over a decade, according to a new report released Wednesday by Redfin.
The number of homes for sale in the United States fell 7.1 percent year over year to 1.4 million on a seasonally adjusted basis — the lowest level since Redfin started tracking the metric in 2012, according to the report.
Four years ago in May 2019, 2.2 million homes were for sale or 38.6 percent more — illustrating the severity of the impact of the COVID-19 pandemic on the U.S. housing market.
While low mortgage rates spurred a feeding frenzy throughout 2020 and 2021 that depleted much of the available inventory, the comparatively high mortgage rates present now have prevented inventory from replenishing itself as homeowners with mortgages are reluctant to give up their lower rates.
Over 90 percent of homeowners with mortgages have a rate below 6 percent, while over 80 percent enjoy a rate below 5 percent. The average 30-year fixed mortgage rate was 6.43 percent in May, up from 5.23 a year earlier and the record low of 2.65 percent seen in 2021.
The Federal Reserve declined to raise interest rates during its June meeting but Federal Reserve Chair Jerome Powell said Wednesday that further rate hikes this year are “likely.”
While high mortgage rates are keeping many would-be buyers out of the market, housing prices have not fallen significantly and are propped up by low supply and the amount of demand that remains.
The median U.S. home sale price was $419,103 in May, down just 3.1 percent from a year earlier when prices hit a record high of $432,311.
Daryl Fairweather
“It’s too early to say that price declines have bottomed out,” Redfin Chief Economist Daryl Fairweather said in a statement. “Prices may have room to fall because mortgage rates could still rise. The Federal Reserve just signaled that it is likely to continue raising interest rates this year.
“That could further hamper homebuyer demand and cause home prices to fall in the near term, though the drops would be minimal. We’re unlikely to see double-digit price declines like we did during the 2008 housing crisis.”
Price changes differ drastically from market to market, the report notes. Austin, Boise and Oakland — all of which heated up intensely during the pandemic — each recorded double-digit price decreases as the market cooled.
Meanwhile, prices rose roughly 10 percent in Hartford, Connecticut; Rochestester, New York; and Cincinnati as affordable cities became more attractive to buyers looking to stretch their budgets.
