The US housing market is increasingly tending in favour of buyers, according to real estate agent Redfin. However, this is not because Americans are suddenly being inundated with affordable homes. Rather, it is a consequence of many buyers withdrawing from the market, as mortgage rates around 7% are driving monthly payments to unaffordable levels. According to the National Association of Realtors (NAR), sales of existing homes in July 2023 maintained their pace from the previous month but remained 16.6% below the level of the same month last year.
Activity in the US housing market reached an almost record low in July, with only minor differences from the 2020 low point during the height of the pandemic. According to Redfin, the number of pending home sales nationwide fell by 19% year-on-year, while the number of home viewings was 11% below last year's level. Meanwhile, housing supply grew only moderately by 5%.
Pressure from mortgage rates and scarcity
The current situation is significantly influenced by two factors: increased mortgage rates and the ongoing scarcity of available homes. Many owners who financed their properties with mortgages at historically low rates before the interest rate increase are hesitant to sell them now. This leads to a continued tight supply, even though demand is dampened by the high financing costs.
The average selling price for homes in July rose slightly by 1.6% year-on-year to $388,800. This indicates that the few properties on the market can maintain or even slightly increase their value, while the overall volume of transactions is significantly reduced. The average time a home spends on the market increased from 26 days to 29 days, signalling a slight easing for buyers who are still in the market.
Market conditions and outlook
Supply bottlenecks are structural in nature and are not expected to resolve in the short term. Redfin's Editor-in-Chief, Chris Hamrick, emphasised that competition for scarce listings still exists. He noted that high mortgage rates deter many people from selling their homes, which supports prices, while simultaneously discouraging buyers.
- —Pending home sales: 19% decline year-on-year.
- —Home viewings: 11% decline year-on-year.
- —Housing supply: 5% increase year-on-year.
- —Average selling price: 1.6% increase to $388,800.
These figures underscore the complex situation of the US housing market: although demand is falling due to interest rates, limited supply keeps prices relatively stable. Buyers benefit from a slightly extended listing period but continue to face challenges regarding affordability and choice.
