More homeowners are listing their properties for sale, but these homes are taking longer to sell as potential buyers contend with high prices and interest rates. According to the latest market report by Zillow, new listings from home sellers surged by 13% in May compared to a year ago.
“You have an increase in sellers coming back on the market,” said Orphe Divounguy, a senior economist at Zillow. Despite this influx, buyers have not returned to the market in sufficient numbers, leading to a rise in inventory. Zillow found that the number of homes on the market rose 22% compared with last year.
“Homes are staying on the market for a bit longer because the sales are not keeping up with the flow of homes coming on the market,” Divounguy explained.
According to a new analysis by Redfin, nearly two-thirds (61.9%) of homes listed in May had been on the market for at least 30 days without going under contract. Additionally, about 40.1% of homes for sale in May had been listed for at least two months without a contract.
“The market is slowing down. Homes are taking longer to sell and that allows inventory to accumulate on the market,” said Daryl Fairweather, chief economist at Redfin.
Inventory Shortage Despite Increased Listings
Despite the recent increase in supply, the market remains starved for inventory. Divounguy highlighted that the current housing inventory is still 34% below pre-pandemic levels. “We’re short nationwide of about 4.3 million homes,” he said, indicating a significant housing unit deficit.
High mortgage rates and strained housing affordability have made it difficult for buyers to enter the market. “Buyers are facing these incredibly high mortgage rates, at least relative to what they were during the pandemic,” said Fairweather, noting that many potential homebuyers lack the motivation and financial ability to purchase a home.
Mortgage Rates and Buyer Sentiment
As of June 13, the 30-year fixed rate mortgage in the U.S. decreased slightly to 6.95% from 6.99% the previous week, according to Freddie Mac data via the Federal Reserve. However, significant movement in mortgage rates is unlikely in the near term. The Federal Reserve held rates steady at its June meeting and anticipates just one rate cut this year, with its next meeting scheduled for July 30-31.
“There’s no right answer for homebuyers who are deciding whether to wait or not,” Fairweather said. “It’s just up to chance when mortgage rates drop. Nobody really knows when that will happen, so it’s hard to plan your life around that.”
Regional Variations in Unsold Inventory
Certain markets in the U.S. are experiencing a notable increase in unsold inventory. For instance, in Dallas, Texas, 60.5% of listings stayed on the market for at least 30 days, up from 53% a year earlier, according to Redfin.
In Fort Lauderdale, Florida, the share of unsold listings that remained on the market for at least 30 days rose to 75.5%, up from 68.2% a year prior. Similar increases were observed in Tampa and Jacksonville, Florida, where the shares of unsold homes on the market for 30 days were 68.7% and 69.2%, respectively, up from 61.9% and 62.9% a year ago.
“When you give buyers more options, that means they have more bargaining power,” Divounguy noted.
Buying Strategies in a Slow Market
If you notice homes lingering on the market longer in your area, there might be an opportunity to negotiate a property for under its listed price, Fairweather suggested.
She advised prospective buyers to leverage the home inspection process. If significant issues are discovered that were not noticeable during the initial walkthrough or disclosed, it might be worth asking the seller to make repairs. However, Fairweather cautioned against being overly demanding. “You don’t want to be nit-picky and ask for every single repair,” such as chipped paint, she said.
The housing market is currently experiencing a unique dynamic where more homeowners are listing their properties, yet sales are lagging due to high prices and interest rates. This has led to increased inventory and extended time on the market for many homes. For potential buyers, this environment presents both challenges and opportunities, requiring strategic planning and careful negotiation.
