- The US real estate market is facing a chicken and egg problem, according to Realtor.com.
- High mortgage rates deter buyers and sellers who don’t want to trade off the low rates they previously locked in.
- New home listings fell 22.7% in May, with many sellers and buyers staying put, but home prices could start to fall.
Realtor.com highlighted the “chicken and egg” problem currently plaguing the housing market: high mortgage rates are keeping home buyers and sellers out, with the former reluctant to spend and the seconds not wanting to part with the lower rates they have locked in. on current homes.
This means that even buyers who are willing to pay high rates are struggling to find homes for sale. In May, there were 22.7% fewer new homes listed than last year.
“Many sellers are expressing concern about finding another home, which may cause some of them to put their listing plans on hold,” said Danielle Hale, chief economist at Realtor.com. “But it reduces the total number of options for buyers in the market.”
Certainly, although there are fewer new home sellers entering the market, the total number of new and existing home listings remains 23.4% higher than last May. But those homes remain on the market for a median of 43 days, about two weeks longer than a year ago.
Still, according to Hale, it’s possible that house prices could rise in June, as they tend to do at this time of year, before falling.
Last June, the median home price in the United States hit a record high of $449,000. This, however, appears to be a less likely mark for this month as year-over-year price growth has eased.
“According to current trends, it is possible that [home prices] will not reach the prior year’s peak for the first time in our data,” said Sabrina Speianu, head of economic data at Realtor.com.
Again, this comes down to consistently high mortgage rates. If they stay in the 6% or 7% range, house prices may eventually have to fall to compensate. Buyers have been criticized by the current combination of high tariffs, high prices and low inventory.
This trend is already taking shape on the market, since the share of listings with price reductions has gone from 10.2% last May to 12.7% this year.
“Sellers appear to be aiming for a relatively high starting point in the market this year and are ready to trade if necessary,” Hale said.
Meanwhile, the housing market has become increasingly localized, with price movements varying by wide margins depending on location. Price growth in Miami, for example, jumped 10.9%, while San Francisco saw a decline of 10.1%. This disparity between the two cities is near a 30-year high.
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