The housing market usually comes to life in the spring, when warmer weather buyers show up. This year, housing experts say, the market appears to be stuck in a deep freeze, with the biggest reason being a lack of sellers.
There is interest among buyers – mortgage applications have been by 10 percent in March from the previous month – but the number of homes for sale is low. The mismatch is due in part to homeowners who tend to sell but sit on the sidelines, afraid of the exorbitant prices and mortgage rates they might encounter as buyers.
More than three-quarters of sellers are in A recent survey by Realtor.com They said they felt “trapped” in their home because of their low mortgage rate. More than half said they intended to wait for prices to drop before putting their homes on the market.
Sandy Robinson, a 71-year-old retired teacher in Fairhaven, Massachusetts, is freaked out by the market. She would like to sell her two-bedroom townhouse but is worried about being able to afford a new one. “It’s a little scary now,” she said, “and you have to be careful.”
Stagnation has plunged the housing market, when it should be getting stronger. Existing home sales in March fell 22 percent from a year earlier, according to the National Association of Realtors. The total inventory of unsold homes on the market at the end of March was 2.6 months, which means it will take a long time to sell. Inventory is usually twice that amount to balance supply and demand.
“We’re in a real stalemate,” said Robert Fricke, company economist at the Navy Federal Credit Union. “It will be a tedious process to unfreeze the market and it will take a long time to return to normal supply and demand.”
Fewer homes for sale means more competition among buyers, leading to bidding wars and price hikes. Although down from recent highs, the median home price is still nearly 40 percent higher than it was at the start of 2020, according to S&P CoreLogic Case-Shiller Indexwhich measures prices across the country.
“Everyone is a little surprised at the level of price elasticity,” said Todd Teta, chief product and technology officer at Atom Data Solutions, a real estate analytics firm.
Matt Berger wants to sell his three-bedroom home in Lebanon, Ohio, where he lives with his wife and two young children, but he’s holding back. “It feels tight now,” he said, “and it’s only going to get tighter as the kids grow.”
They are looking to move closer to Cincinnati, but homes they could afford a year ago are now out of their price range. Adding to the pressure is the low mortgage rate on their current home: “We’re in the middle of the trio” — nearly half the national average — “and I’d hate to say goodbye to that,” said Mr. Berger, 42.
“It’s a double whammy of rising interest rates and rising home values, and that scares us,” he added. He and his wife hope that mortgage rates will drop and that they will find a cheaper house in a year or two, before their children settle into school.
The most popular mortgage, a 30-year fixed-rate mortgage, has an average rate of 6.43 percent, Freddie Mac reported Thursday, more than double what it was two years ago. Mortgage rates peaked above 7 percent late last year, but the decline since then has been slow and erratic.
To get sellers more motivated again, rates must drop to the “magic mortgage rate” of 5.5 percent, according to A survey conducted by John Burns Research and Consulting. More than 70 percent of potential homebuyers told the researchers that they are not willing to accept a mortgage higher than this rate.
“Homeowners seem to be very patient right now,” said Megan Sherlock, senior research analyst at John Burns. She added, “Until things get a little better, these people are going to hold on.”
Most industry experts believe that the turning point is still far away. “This will be a transitional year,” said Danielle Hill, chief economist at Realtor.com. “As we move into 2024, we should see more people with an appetite to buy.”
The market could also melt as demand from frustrated buyers is met by homebuilders, who have “historically created first-time homebuyers and move-up opportunities,” said Mr Teta of Atom.
The lack of existing home inventory seems to be driving buyers into newly built homes, which is a smaller market where sales have picked up better. New single-family home sales jumped nearly 10 percent in March from the previous month, According to the Census Bureau.
The National Association of Realtors expects new home sales to increase 4.5 percent this year and 12 percent in 2024. It expects existing home sales to fall about 9 percent this year and then pick up again in 2024.
There are always reasons for reluctant homeowners to sell, such as job transfers, downsizing, or divorces, said Eliana Abella, executive director of sales for The Abella Group, a Miami real estate brokerage.
“If you plan to stay in your home for longer than five years,” she said of current interest rates, “6 percent won’t kill you.”
However, many homeowners are content to wait.
Eileen Goldman, a 72-year-old retired attorney in Naples, Florida, is looking to slim down. She and her husband, Sam Savage, have lived in their two-story home since 2004, but they know that stairs will only get more difficult as they get older.
“We both work, and that’s not a problem,” Goldman said, adding, “We want to act now before it gets too difficult.”
But they are in no hurry. She said, “We don’t have to do that,” because they watch local prices. “We’ll also be fine staying.”
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