Inventory has posted its biggest decline in over a year, with homeowners hanging onto their comparatively low mortgage rates. That trend will probably persist, as the Fed’s announcement that it may hike interest rates a few more times is likely to keep mortgage rates elevated. Low supply is stifling sales, but many buyers are still showing early signs of interest.
The total number of U.S. homes for sale dropped 6% from a year earlier during the four weeks ending June 11, the biggest decline in 13 months. New listings dropped 23%, continuing a 10-month streak of double-digit declines. Those add to the deepening post-pandemic inventory shortage; there are 39% fewer homes for sale now than there were five years ago, in June 2018.
The inventory crunch is partly due to a homebuilding slump that’s lasted for over a decade and partly to mortgage rates falling to record-low levels during the pandemic, then shooting up. Mortgage rates have more than doubled since 2021, landing at close to 7% this week. The record-low mortgage rates of 2020 and 2021 drove a homebuying boom, depleting inventory. When rates started going up in the beginning of 2022, many would-be sellers backed off, failing to fill the inventory hole. Elevated rates discourage homeowners who would prefer to hold onto a comparatively low rate from selling.
Pending home sales are down 17% year over year, the biggest decline in over four months, but it isn’t all due to a lack of demand. People are still showing interest in buying. Mortgage-purchase applications rose 8% over the last week, and Redfin’s Homebuyer Demand Index–a measure of requests for tours and other services from Redfin agents–is up over the last two weeks and near its highest level in a year. That means there’s a fair amount of pent-up demand, and many buyers will be ready to pounce when more homes hit the market. Demand outpacing supply is preventing home prices from falling drastically: The median sale price is down just 1.1%, the smallest annual decline in three months.
This week’s economic news indicates that mortgage rates are unlikely to decline in the next few months, which may mean new listings stay low for the time being and the inventory shortage deepens. The latest inflation report shows that price increases have continued to cool, and the Fed announced that it will pause interest-rate hikes this month after nearly a year of increases but may hike a couple more times this year.
“The Fed’s indication that there are more rate hikes to come is not what homebuyers want to hear. It’s likely to keep mortgage rates elevated and may even push them up a bit,” said Redfin Economics Research Lead Chen Zhao. “People who are sitting on the sidelines, waiting for mortgage rates to decline, should know that’s unlikely to happen in the foreseeable future. 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.”
Unless otherwise noted, the data in this report covers the four-week period ending June 11. Redfin’s weekly housing market data goes back through 2015.
For bullets that include metro-level breakdowns, Redfin analyzed the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy.
Refer to our metrics definition page for explanations of all the metrics used in this report.
