With buying costs high, the US housing market has seen demand falter. What does this mean for buyers and is this expected to continue?
Across the US housing market, more homes have been sitting on the market for at least 30 days without going under contract. Redfin’s housing market data revealed that three in five, or 61.9%, of homes, that were on the market in May this year had been listed for at least 30 days without going under contract.
That was up from 60% one year prior and roughly 50% from two years earlier. The share of properties sitting on the market for at least one month has been growing year-on-year since March. Additionally, two in five, or 40.1%, homes that were up for sale in May had been listed for at least two months without going under contract.
This figure has not changed from a year prior and is up from 27.8% from two years ago. Redfin economists forecast the share of homes on the market for at least 60 days will start increasing if mortgage rates stay high.
While growth in new listings has accelerated, buyer demand remains low, as it has been since mortgage rates began rising back in 2022. More properties for sale in the US housing market paired with slowing demand has led to less-desirable listings to pile up, leaving some without a buyer.
Des Bourgeois, a Redfin real estate agent in Detroit, says: “A few years ago, I never would have told a seller they need to freshen up their paint, fix their furnace and make sure their roof is up to date before putting their home on the market–but now, I tell them to make the house as pretty as they possibly can.”
US housing costs remain high
Record-high house prices and mortgage rates have priced out many buyers in the US housing market. This has cooled demand at a time when the property sector is usually warming up. In June, the median sale price increased by 4.8% to an all-time high of $396,000, according to Redfin.
In May, the average 30-year fixed mortgage rate was 6.99%, which was more than double the pandemic-era lows. At that point, the median monthly mortgage payment was only $30 shy of its record high. While mortgage rates have now come down some, it’s still at historically high levels.
If inflation continues to cool, mortgage rates may decrease further, which could boost demand in the US housing market. Agents at Redfin have reported that move-in ready homes in desirable neighbourhoods are still selling quickly. However, listings that don’t fit that description have been piling up, particularly in certain areas.
Marije Kruythoff, a Los Angeles Redfin agent, comments: “Some buyers think they can get a deal because they’re hearing the market is cool, and some sellers think every home will sell for top dollar no matter the condition. In reality, everything depends on the house and the location.”
“The hottest properties in this area are either move-in ready or complete fixer-uppers. The homes in between, those that are pretty nice but not updated, are sitting on the market longest.”
Could house price growth slow down?
US housing costs could come down across the coming months. During the four weeks ending 16th June, home sales dropped 3.8%, which is the biggest year-on-year drop in nearly four months.
At the same time, buyers are shying away from the beginning stages of the house-hunting process as requests for tours and other buying services have declined. This is predominantly due to the near record-high housing costs, but this has given some buyers more negotiating power for certain properties.
Moving forward, house prices may come down. Price growth could lose some momentum as the share of sellers dropping prices is at the highest level since November 2022. Asking price growth has also slowed across the US housing market.
Jonathan Ader, a Redfin agent in the Palm Springs, CA area, states: “Things have reversed since the pandemic. Now, most homes—the exception is relatively affordable homes that are move-in ready—are selling under asking price.”
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