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The number of homes for sale in the United States plunged 6 percent from a year earlier during the monthlong period ending June 11 — a nearly 40 percent free-fall from five years ago, according to an analysis released Thursday by Redfin.
New listings dropped 23 percent year over year during the same period, pulling the total number of homes on the market down 39 percent from June 2018, according to the Redfin data.
The inventory drop-off is partly due to a decade-long homebuilding slump and mortgage rates climbing to 20-year highs, leaving most would-be homesellers reluctant to list homes and give up on lower mortgage rates.
“The Fed’s indication [Wednesday] that there are more rate hikes to come is not what homebuyers want to hear,” Redfin Economics Research Lead Chen Zhao said in a statement. “It’s likely to keep mortgage rates elevated and may even push them up a bit.”
A separate Redfin study released this week found that nearly 92 of homeowners with mortgages have an interest rate below 6 percent. Additionally, 82.4 percent boast a rate below 5 percent, 62 percent enjoy a rate below 4 percent and 23.5 percent lucked out on locking in a rate below 3 percent, according to the analysis.
The record-low mortgage rates of 2020 and 2021 drove a feeding frenzy in the housing market that also depleted much of its inventory. In March 2019, 1.4 million homes hit the market in the United States. Three years later that inventory had been slashed in half to just 727,000.
While the slowing of the housing market has resulted in inventory gains — as much as an 18 percent year-over-year gain in February, according to an Intel report earlier this week — that recovery stalled hard as the market smacked against a dearth of new listings.
Mortgage rates have more than doubled over the past year, landing close to 7 percent this week. During its June meeting, the Federal Reserve voted not to raise a key benchmark interest rate this month following a positive inflation report, but Fed chair Jerome Powell left the door open for future rate hikes if the economy doesn’t continue to cool — dashing the hopes of homebuyers hoping for a mortgage rates decrease.
“People who are sitting on the sidelines, waiting for mortgage rates to decline, should know that’s unlikely to happen in the foreseeable future,” Zhao added. “If a home that’s in your price range and has everything on your wishlist hits the market, there’s no good reason to wait.”