With a sudden pullback in home sales due to sharply rising mortgage rates, sellers are now rushing to get into the market before the sizzling housing market cools off dramatically.
According to Realtor.com., the supply of homes for sale rose 9 percent last week compared with the same period last year. That's the largest year-over-year gain the company has recorded since it started tracking the indicator in 2017. Real estate brokerage Redfin also reported that new houses grew almost twice as fast in the four weeks ending before May 15 as they did in the same period a year ago.
The data shows that sellers see weakness in the housing market clearly. According to the National Association of Realtors, home sales contracts signed fell nearly 4 percent in April from March and more than 9 percent from the same period of last year. This marks the sixth consecutive month of decline and the worst performance in nearly a decade.
The number of signed housing sales contracts refers to the number of contracts signed for houses to be sold, not final closings, so the indicator may better reflect buyers’ immediate reaction to rising interest rates.
In addition, sales of newly built homes fell by 16% in April compared to March based on the number of signed contracts, far exceeding expectations, according to previously released data from the Census Bureau.
Sales are slowing because mortgage rates have risen sharply since the beginning of this year. The current average rate on a 30-year fixed mortgage is already over 5 percent, while the rates were just close to 3 percent at the beginning of the year.
“In the past, most of our (listed) homes would receive 10 to 15 offers.” A Redfin Los Angeles-area real estate agent, Lindsay Katz, said, “Now a house would receive two to six offers, and it still needs to be a good house.”
Although home prices rose steadily in the first two years after the pandemic, falling interest rates during that time largely offset those gains for buyers.
Home sellers, who were still dominant six months ago, are now clearly feeling less demand. For the week ending May 15, Redfin's Demand Index, which measures the number of home viewings and other requests for homebuying services, fell 8 percent year-over-year. It was the biggest drop since April 2020, when most buying activities were put on hold because of the pandemic.
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