A new ground-level report from Redfin confirms that this year’s spring housing market is more tepid than in years past, with supply constraints combining with high mortgage rates to suppress home sales. But houses are selling, Redfin noted — and the houses that are selling are selling fast.
Redfin data shows inventory dropping of late, with new for-sale listings down 19.3% year over year in the four-week period ending May 7. The stall has led to an uncharacteristic monthly drop in supply, with active listings (the number of homes listed for sale at any point during the period) dropping about 1% from the prior month. Usually, active listings are on the uptick at this time of year as sellers look to take advantage of the busy spring buying season. But the market continues to feel the impact of the so-called “lock-in effect,” in which homeowners are hesitant to give up the low interest rates on their current properties and buy in a higher rate environment.
That’s helped to slow sales as the spring has ramped up. Pending home sales over the four weeks ending May 7 were down 15.8% annually. But they were on the uptick week over week, suggesting that buyers remain on the hunt. Redfin described the pool of buyers as “small but determined,” noting that almost half of the homes that are selling are coming off the market within two weeks.
“This spring’s housing market is hot but cold, with scant listings making it less active than usual but fast and competitive at the same time,” said Taylor Marr, Redfin’s deputy chief economist. “The good news is that buyers are out there, trying to find a seat in a game of musical chairs. The bad news is there aren’t enough chairs.
“A lot of potential home sales are locked up until mortgage rates come down to a level for which current owners would be willing to trade in their 3% rate. The problem is that’s unlikely to happen anytime soon, as although inflation is steadily coming down from last year’s record-high levels, it’s still above target.”
Interestingly, the seasonally adjusted Redfin Homebuyer Demand Index, which tracks requests for home tours and other homebuying services from Redfin agents, saw a slight monthly uptick during the week ending May 7. It was down only 2% from the same week in 2022, the smallest annualized decrease in a year. That’s not entirely surprising, however, as demand was also cool at this time last year, with mortgage rates climbing above 5% for the first time since 2009.