\n(NASDAQ: RDFN) \u2014 The number of homes for sale in the U.S. fell 7.1% year over year to 1.4 million on a seasonally adjusted basis in May, according to a new report<\/a> from Redfin (redfin.com<\/a>), the technology-powered real estate brokerage. That\u2019s the lowest level in Redfin\u2019s records, which date back to 2012, and the first annual decline since April 2022.<\/p>\n
\nBy comparison, there were 2.2 million homes for sale in May 2019\u2014before the pandemic rocked the U.S. housing market\u2014meaning housing supply was 38.6% below pre-pandemic levels this May. America\u2019s housing stock is dwindling because there are very few people selling homes. New listings of homes for sale declined 25.2% year over year in May to the third lowest level on record on a seasonally adjusted basis, as homeowners were handcuffed by high mortgage rates.<\/p>\n
\nNearly every homeowner with a mortgage has an interest rate below 6%, meaning many are opting to stay put because selling and buying a new home would mean taking on a higher monthly mortgage payment. The average 30-year-fixed mortgage rate in May was 6.43%, up from 5.23% a year earlier and a record low of 2.65% in 2021.<\/p>\n
The Intensifying Housing Shortage Is Propping Up Home Prices<\/b><\/p>\n
\nThe median U.S. home sale price was $419,103 in May. That\u2019s down just 3.1% from a year earlier, when prices hit a record high of $432,311. While home prices fell in May, they posted a smaller decline than they did in April, when prices dropped 4.2% from a year earlier\u2014the largest decrease on record with the exception of January 2012.<\/p>\n
\n\u201cIt\u2019s too early to say that price declines have bottomed out,\u201d said Redfin Chief Economist Daryl Fairweather. \u201cPrices 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\u2019re unlikely to see double-digit price declines like we did during the 2008 housing crisis.\u201d<\/p>\n
\nFairweather continued: \u201cMany people think it\u2019s a bad time to buy a home because mortgage rates are high, but they should keep in mind that when rates do ultimately fall, many buyers waiting on the sidelines could jump back in. That could lead to more bidding wars since there aren\u2019t enough homes for sale, and heightened competition could push up prices, offsetting some or all of the benefit of lower interest rates.\u201d<\/p>\n
\nThe typical home that sells is no longer selling at a discount. The average sale-to-list price ratio, which measures how close homes are selling to their final asking prices, was 100% in May, meaning the typical home that sold was purchased at its list price. That\u2019s down from 103.1% a year earlier, but is the highest level of any May on record prior to the pandemic and follows nine straight months of sub-100% sale-to-list price ratios.<\/p>\n
\nIt\u2019s worth noting that price changes differ vastly from market to market. For example, Austin, TX, Boise, ID and Oakland, CA all saw double-digit year-over-year price declines in May, while prices rose roughly 10% in Hartford, CT, Rochester, NY and Cincinnati. Pandemic boomtowns and expensive coastal hubs have seen their housing markets slow relatively quickly because prices soared to unsustainable levels during the pandemic and are now coming back down to earth.<\/p>\n
The Housing Shortage Is Fueling Homebuyer Competition in Many Markets<\/b><\/p>\n
\nWhile demand from homebuyers has fallen, new listings have fallen even further, meaning many of the buyers who are out there are encountering bidding wars.<\/p>\n
\nEven though the typical home that sold in May was purchased for its list price, more than one-third (37.5%) went for more than their list prices\u2014a sign that some buyers are facing competition. That\u2019s down from 59% a year earlier but is the highest share of any May on record prior to the pandemic.<\/p>\n
\nNearly half (46.7%) of home offers written by Redfin agents faced a bidding war in May on a seasonally adjusted basis. While that\u2019s down from 56.1% a year earlier and a peak of 69.6% in January 2022, it\u2019s notable that so many buyers are facing competition at a time when demand is sluggish.<\/p>\n
\n\u201cThere\u2019s a huge lack of housing inventory in Miami, and that combined with higher interest rates is making homebuyers\u2019 lives very challenging. Their money just isn\u2019t going as far,\u201d said local Redfin Premier real estate agent Rafael Corrales. \u201cI\u2019m encouraging my buyers to be a little more flexible; in some cases, I\u2019m suggesting they go back to 2021 winning strategies, which can mean waiving contingencies and offering high earnest money deposits because they\u2019re competing against a lot of cash buyers.\u201d<\/p>\n
Home Sales Are Falling, But Not as Quickly as They Were at the Start of the Year<\/b><\/p>\n
\nClosed home sales fell 19.8% year over year on a seasonally adjusted basis in May, the smallest drop in nearly a year and an improvement from the record 35.3% decline in January. Still, sales were significantly below pre-pandemic levels, down 21% from May 2019.<\/p>\n
\nPending home sales performed similarly. They fell 21.4% year over year on a seasonally adjusted basis in May, the smallest drop since last summer and an improvement from the record 36.1% decline in November. Pending sales were down 16.1% from May 2019 levels.<\/p>\n
May 2023 Highlights<\/b><\/p>\n
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