The chronic shortage of homes for sale that’s made fierce bidding wars common and sent prices to record highs has long frustrated homebuyers. After a streak of annual declines going back three years, the number of homes for sale finally rose on an annual basis in May and June.
But would-be buyers looking for more modestly priced homes will find scant relief in the listings surge. The increase in homes for sale nationally has been concentrated in the higher-price end of the spectrum, $250,000 or higher, while listings for properties priced below that threshold are becoming more scarce.
“In a market that has been so low on inventory, any increase in the availability of homes for sale is going to be welcome, but the biggest increase that we’ve seen so far is in the pricier side of the market,” said Danielle Hale, Realtor.com’s chief economist.
Listings for homes priced at $100,000 or less were down 21.4% in June from a year earlier, while those listed for between $100,000 and $250,000 were down 12.4%, according to Realtor.com.
In contrast, the number of homes listed for more than $250,000 increased 32.1% in June from a year earlier.
On a typical day in June, the number of active home listings totaled 619,305, a nearly 19% increase from the same month last year, according to Realtor.com.
The sorely needed increase in home listings follows a marked slowdown in the housing market.
Sales of previously occupied U.S. homes are slowing as the Federal Reserve hikes rates to combat surging inflation, lifting mortgage rates. In June sales fell to to a seasonally adjusted annual rate of 5.12 million, the slowest pace in two years according to the National Association of Realtors.
The average rate on a 30-year home loan climbed to 5.54% last week, almost double from a year ago, according to mortgage buyer Freddie Mac. Higher rates reduce buyers’ purchasing power at a time when the median U.S. home price hit a new high of $416,000 last month.
“The entry level side of the market continues to be challenging, and it’s particularly hard because those entry level buyers are often most likely to be taking on a mortgage and borrowing, so they’re also the ones that are facing higher mortgage rates,” Hale said.
Hale expects the for-sale home inventory will be up about 15% on average this year, which should help some would-be buyers. But it would take a significant housing market slowdown before the number of homes for sale at the most affordable range of the market increases, she said.