By Margaret Heidenry June 9, 2023
Mortgage rates have finally dipped, after three panic-inducing weeks of climbing upward.
For the week ending June 8, the average 30-year fixed mortgage rate sank to 6.71%, down from the previous week’s 6.79%, according to Freddie Mac.
And that’s not where the good news ends.
Home price growth, which has been spiraling skyward since the COVID-19 pandemic, has also “slowed to a halt,” according to Danielle Hale, chief economist for Realtor.com® in her recent analysis of the latest housing data.
Indeed, median listing prices came in a mere 0.2% higher for the week ending June 3 compared with this same week last year. That’s the lowest level in the history of Realtor.com data, which goes back to 2016.
Yet despite this double dose of good news, Hale points out that “homebuying costs haven’t come down.” In fact, today’s buyers who make a 20% down payment will still pay about $280 more per month than they would have last year.
Here’s what these statistics mean for homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”
How high mortgage rates have changed homebuyer priorities
Although home prices seem to be finally leveling off a bit, the median listing price is still high, coming in for May at a median of $441,000.
High home prices combined with high mortgage rates have pressured many homebuyers to adjust their home-shopping priorities. For many now, their only priority seems to be finding a bargain.
“Affordability has evolved into an increasingly important factor that influences people’s decision-making processes when searching for homes,” says Hale. “In order to attain homeownership, a higher share of online shoppers were drawn toward more affordable markets compared to a year ago.”
Affordability explains why markets in the relatively budget-friendly Northeast have been heating up of late, while markets in the South and West have cooled. Yet hot markets tend to drive home prices higher, so it may be only a matter of time before the balance shifts.
Last month, median home prices in the Northeast shot up by double digits compared with one year ago, while prices in the South and West showed low single-digit growth.
Although many buyers are finding success by scrounging for deals, other buyers are simply pausing their search until interest rates subside.
“Worries about high inflation, rising interest rates, and escalating home prices have caused many prospective buyers, especially more first-time buyers, to postpone their plans to purchase a home,” said Hale.
How high mortgages affect home sellers
Homebuyers aren’t the only ones feeling deflated. Home sellers have also been pulling back from the market, as the number of new listings has declined for 48 straight weeks. For the week ending June 3, new listings are down by 25% compared with a year ago.
“Many remain skittish about listing since it would mean trading in their low mortgage rate for something much higher,” says Hale.
Although new listings are down, overall housing stock (which includes listings both new and old that have been lingering on the market) is 13% higher for the week ending June 3 than the same week last year. But unless more new listings hit the market soon, even overall inventory will soon suffer.
“The ongoing decrease in new listings has restrained the growth of active inventory,” says Hale. “And there is a possibility of further deceleration in the upcoming weeks.”
The pace of home sales slows further
The homes that are still for sale continue to linger—and linger. For the week ending June 3, homes spent 14 more days on the market compared with the same time last year. This marks a 46-week streak of homes taking longer to sell compared with the same week the previous year.
Yet although things are slowing, homes remained for sale for about 43 days in May, which is still faster than the average May from 2017 to 2019.
“Homes are still selling faster than the pre-frenzy norm, emphasizing the persistent supply-demand imbalance,” says Hale.
And this means that those homeowners who do decide to sell at an affordable price will likely be greeted by plenty of buyers looking to make an offer.
Meanwhile, all those homebuyers searching high and low for bargains might want to give those stale listings a second look, and gamble that lowballing might actually work.