National Short Housing Inventory Keeps Prices Afloat, For Now

Sale-to-list price ratio has hit 100%; Few homes sell above asking prices
Published on Jul 6, 2023

Home-price declines are shrinking, according to Redfin. 

Currently, according to a recent report, The typical U.S. home is selling only about $4,000 less (-1%) than the all-time high set last June, the smallest year-over-year drop in nearly four months. 

According to the Redfin report, this is the second time since August 2022, that the sale-to-list price ratio has hit 100%—the average home is now selling for its asking price. 

The reason for this is inventory. According to Redfin, a lack of homes for sale is keeping prices afloat. 

New listings fell 27% from a year earlier during the four weeks ending June 25, the biggest drop since the start of the pandemic. High mortgage rates means that many homeowners are staying put to hang onto their comparatively low rates. 

The average 30-year mortgage rate is still near 7%, more than double 2021’s record-low levels, said the Redfin report. 

In May 2023, California home prices were down 5.8% compared to last year, selling for a median price of $785,900. On average, the number of homes sold was down 22.5% year over year and there were 26,332 homes sold in May this year, down 33,993 homes sold in May last year. The median days on the market was 26 days, up seven year-over-year, according to Redfin.

While high mortgage rates are still keeping homebuyers at bay, home buyers are still a larger number than outnumber home sellers. 

Buyers are snapping up inventory faster than it’s being listed, which is keeping home prices elevated, said Redfin, adding that pending home sales are down 15%, which is significantly smaller than the drop in new listings.  

“The market isn’t nearly as fast as it was 18 months ago, when homes were flying off the market for well over asking price, and it’s not as slow as it was six or seven months ago, when mortgage rates first shot up,” said Redfin Premier agent Andrea Chopp. “Buyers should keep in mind that desirable homes are getting multiple offers and selling above asking price. And sellers should know that their home may not attract as much competition as their neighbor’s home did two years ago, but it will sell if they price it fairly and put effort into marketing. Things like making small repairs and staging are important again.”

Meanwhile, according to Redfin, the daily average 30-year fixed mortgage rate was 6.91% on June 28,  down from a half-year high of 7.14% a month earlier. For the week ending June 22, the average 30-year fixed mortgage rate was 6.67%, down slightly from the eight-month high of 6.79% hit at the beginning of the month.

In addition, mortgage-purchase applications during the week ending June 23 rose 3% from a week earlier, seasonally adjusted. Purchase applications were down 21% from a year earlier. 

The seasonally adjusted Redfin Homebuyer Demand Index–a measure of requests for home tours and other homebuying services from Redfin agents–hit its second-highest level since May 2022 during the week ending June 25. It was up 10% from a year earlier, the fifth consecutive annual increase. Demand was dropping at this time in 2022 as mortgage rates rose.

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