The number of homes for sale for 30 days or more rose as much as 60 percent in some areas, with a 12.5 percent increase in July from a year earlier, as experts say the U.S. is shifting to a buyer’s market .
About 61.2 percent of homes for sale stayed on the market for at least 30 days, up from 54.4 percent in July 2021, according to a new Redfin report.
Among the major cities with the most homes remaining on the market year-over-year were Oakland, at 60.7 percent; Phoenix at 54.4 percent; and Austin at 50.9 percent; while Fort Lauderdale, Florida was the only city to see a 0.9 percent drop.
Redfin economists said the housing market’s reaction to rising mortgage and federal rates kept homes on the market longer, prompting buyers to slow down and reconsider their decisions.
“Buyers can take the time to make careful decisions about homes without having to worry as much about bidding wars, bidding above asking price and forgoing contingencies,” wrote Taylor Marr, Redfin’s associate chief economist, in the report.
“That’s a different story for sellers who have spent the last two years hearing about their neighbors’ homes and getting multiple offers on the day they go on sale. Now they need to bring the prices down and get back to the basics of selling a home, like staging and refreshing the painting to grab buyers’ attention.’
The move follows dramatic rate hikes by the Federal Reserve since May, with the market yet to fully react to the latest hike in late July as the central bank says more hikes are expected this year to fight inflation.
Oakland, Phoenix and Austin saw the largest increases in stale inventory, with Fort Lauderdale, Florida being the only major city to report a decline in July
The number of homes being sold for 14 days, 30 days and 60 days or more has risen for the first time since the pandemic began
What home buyers and sellers need to know: How the Fed is affecting mortgage rates
The Fed does not set mortgage rates.
When you hear about the Fed’s “rate hikes,” it means they’ve raised their target range for the federal funds rate.
In July, the Fed raised its target by 0.75 percent to 2.25-2.5 percent. It was the fourth in a series of hikes that began in March.
Changes in the fed funds rate affect the cost of borrowing throughout the economy, particularly in the housing market.
When the Fed raises its target rate, mortgage rates usually follow.
Mortgage lenders determine borrowing costs based on inflation and interest rate expectations.
Both are up at the moment, so we’ve seen mortgage rates go up as well.
The average 30-year fixed-rate mortgage was 3.3 percent for the first full week of 2022, according to the Mortgage Bankers Association. By May it was up to 5.36 percent.
Expect it to continue higher as the Fed continues to hike.
July 2022 marks the first year-over-year increase in the supply of “stale” housing since the pandemic began, with Redfin defining it as stale homes that have been on the market for at least 30 days without a contract being signed.
It’s also the second-biggest rise in a decade, surpassed only by a 13.9 percent surge in April 2020 when the housing market ground to a halt due to COVID.
Redfin also found that the number of homes for sale more than two weeks and more than two months were also up 7.6 percent and 6.8 percent year-over-year, respectively.
The stale housing supply comes after a year that favored sellers where competition was fierce and homes were being sold off the market. According to Redfin, the typical house was signed in July 2021 in just 15 days.
The home-buying race has been fueled largely by low mortgage rates and the Federal Reserve cutting interest rates to near zero amid the pandemic.
The average 30-year fixed-rate mortgage was just 3.3 percent through the first full week of 2022, according to the Mortgage Bankers Association.
Those conditions have since reversed, and the Fed has hiked rates by near-record percentage points to combat rampant inflation, which hit 9.1 percent in July.
As interest rates rose, mortgage rates followed, hitting nearly 6 percent in July before cooling to about 5 percent on August 4th.
Christopher Johns, a Redfin real estate agent based in Houston, Texas, confirmed that the market has seen a complete turnaround.
“The market turned 180 degrees from early spring to late spring, with buyers pulling back because of high mortgage rates,” he said.
“Many sellers tell me they feel like they missed the hot market.”
30-year fixed-rate mortgages averaged about 5 percent on Aug. 4, marking the second week of the decline despite Fed rate hikes
Federal interest rates have been cut to near zero to help the country through the coronavirus pandemic. The Fed started raising interest rates in March 2022
US inflation hit a 41-year record high of 9.1 percent in June
Legacy stock has seen the biggest increase in Oakland, California, where the number of homes for sale that stayed on the market for 30 days or more rose 60.7 percent year-over-year.
In Phoenix, obsolete inventory has increased 54.4 percent since 2021 and in Austin, it has increased 50.9 percent.
The other large cities that made the top 10 were Anaheim, California, with 49.7 percent; Riverside, California, at 46.7 percent; Fort Worth, Texas, at 43.4 percent; Dallas at 42.9 percent, Washington DC at 42.5 percent, Sacramento, California at 41.7 percent; and Seattle at 41.3 percent.
Fort Lauderdale, Florida, was the only major U.S. city to see a nearly 1 percent decline in obsolete inventory.
Experts said the rise in obsolete inventory is likely to stabilize soon and better reflect how the housing market was in the pre-pandemic era.
Johns said he repeated this to his clients: “I remind potential sellers that we are not in a real estate market crash; it’s a correction.
“If sellers are listing their home for a little less than they were five months ago, chances are they’re still getting a solid offer.
And my advice to buyers is to remember that 5 percent isn’t the end of the world; they can refinance at any time in the future when interest rates fall.’
A lack of affordable options is driving US home sales back. The fastest declines in new upcoming sales from May to June were in San Jose (-24.3%), Seattle (-23.9%) and Salt Lake City (-20.8%).
The largest proportion of home sellers in the US live in the South (39 percent), followed by the Midwest (23 percent) and the West (22 percent). The smallest proportion lives in the Northeast (15 percent). The South has historically had more home construction and fixtures than other regions
The shift toward a buyer’s market is expected to lower home prices across the US, with Redfin and Zillow suspecting the drop will be felt where markets have been hottest.
Redfin predicts that Riverside stands the best chance of the housing market cooling further as the US enters a recession.
Number two on their list is Boise, Idaho, followed by Cape Coral, Florida; North Harbor, Florida; Las Vegas; Sacramento; Bakersfield, California; Phoenix; Tampa, Florida; and Tucson, Arizona.
A recent Zillow report showed competition in red hot markets like San Jose; San Francisco; Seattle; and San Diego — all among the top five most expensive cities in California.
Salt Lake City at 24.1 percent, Sacramento at 21.7 percent, and Phoenix at 20.4 percent saw the highest proportions of price cuts.
Nationally, home price growth slowed in June for the third straight month. Zillow cites “barriers to affordability” as a likely reason for this.
Zillow also found that most sellers listed homes in the South, which accounted for 39 percent of the market, followed by the Midwest at 23 percent and the West at 22 percent in third place.
Sellers in the Northeast accounted for just 15 percent of the market.