A house for sale, for sale, in Laguna Woods, California.
Scott Mlynn | CNBC
Anyone looking to buy a home on the resale market knows the prizes are small. They are about to get slimmer.
According to Realtor.com, the number of homes for sale this month was even 7% higher than in June last year. But in the past week alone, that comparison came out negative, with the number of homes for sale falling below year-ago levels for the first time in 59 weeks.
New listings in the last week of June were 29% lower than the same week a year ago. That is a bigger drop than in previous weeks.
With mortgage rates climbing higher and above 7% again on the 30-year fixed Thursday, homeowners have little incentive to sell their homes, according to Mortgage News Daily. The vast majority of homeowners with mortgages have rates below 4%, some as low as 3%.
An even tighter housing market means house prices are unlikely to cool. Prices peaked last June, after rising more than 45% from pre-pandemic levels. They started falling because mortgage rates had doubled in a few months. But prices bottomed out in January, according to the latest S&P Case-Shiller home price index, despite still higher interest rates and slower sales.
“The ongoing recovery in home prices is broad-based,” Craig Lazzara, general manager at S&P DJI, said in a press release.
Pending saleAccording to a Thursday report from the National Association of Realtors, the number of contracts signed for existing homes fell nearly 3% in May from April.
“Despite slow contract signing pending, the housing market is resilient with about three offers for each offer,” NAR chief economist Lawrence Yun said in a press release. “The lack of housing stock continues to prevent housing demand from being fully met.”
On the other hand, the country’s homebuilders have benefited greatly from the tight market, as May sales were up 12% from April, according to the US Census. Higher mortgage rates played less of a role as builders, some of whom have their own mortgage branch, have lowered rates for buyers. In May, twice as many homes were sold but not yet started as a year ago.
Although the number of single-family homes is finally increasing, they are still well below historical levels. Builders have also underbuilt since the Great Recession, meaning the market was undersupplied long before the recent pandemic-driven run on housing.
“In short, despite all the excitement among homebuilders over the need for more supply, the existing home market is depressed and experiencing a severe case of stagflation with few transactions taking place but prices still very high,” wrote Peter Boockvar, chief investment officer at Bleakley Financial Group.