According to Redfin, the U.S. inventory of homes for sale rose in June, the first time it has happened year-over-year since before the pandemic.

Of the 2% increase, Redfin’s chief economist, Daryl Fairweather, said in prepared remarks: “The country’s economic woes have already cooled the housing market, and will likely continue to dampen demand. .

High mortgage rates are one of the main reasons buyers are staying away, causing supply to pile up. High house prices and a faltering economy also contributed, “creating a more balanced market”, according to the report.

Inventory still in “crisis” state

John Hunt, founder and chief analyst of MarketNsight, notes that 2% is less than half of what it was in 2019.

“It’s not as bad as you might think given all the negative news and rising rates,” he told GlobeSt.com. “We still have a lack of inventory crisis in this country of epic proportions.”

Affordability ‘crushes’ homebuyers

Crystal Sunbury, senior construction and real estate analyst at RSM US LLP, told GlobeSt.com that the rapid rise in mortgage rates, with the 30-year mortgage rate hitting 5.74% on July 8, more than 200 basis points since January, combined with record home appreciation, have crushed affordability for many potential buyers.

The median home price rose from $354,000 to $408,000 from January to May, she said. Increases in house prices and mortgage rates have increased monthly payments by almost 50%. Meanwhile, median family income is estimated to have increased by 2.9% over the same period.

“It has stretched affordability, pushing many buyers to the sidelines, dampening demand significantly over the past two months,” Sunbury said.

Sunbury said the housing market is made up of resales and new builds. Inventory of existing homes has been limited but has risen steadily since March, reaching 1.16 million units in May, according to the National Association of Realtors.

“However, this represents only 2.6 months of supply and remains below pre-pandemic levels,” Sunbury said. “The constraints of the resale market have pushed many buyers towards the new market. Despite supply chain issues and labor constraints, new inventory has risen steadily since 2020 in response to rising demand and reached 444,000 units in May, according to the US Census Bureau. , the highest since 2008.

“Massive wave of resale announcements” unlikely

“As resale home supply returns to the market due to sellers accelerating selling times to not miss market conditions, we are unlikely to see a massive flurry of property listings. resale, as homeowners are likely to choose to keep their low rates locked into mortgages and not sell if they don’t have to.

Sunbury said during the pandemic, many builders changed their strategies to delay sales later in the build cycle.

“This means that many homes in production have not been sold and we should expect to see a wave of this inventory hitting the market,” she said. “The pricing of this inventory and the incentives offered by builders will reflect current market conditions as builders manage their inventory volumes.

Sales will likely fall in the second half of the year and we will likely see market corrections; however, we do not expect a sharp decline in sales as household formations remain strong and buyers continue to seek shelter from inflationary pressures.

Many buyers sitting on their hands

Erin Sykes, chief economist, Nest Seekers International, representing Palm Beach, Miami, Hamptons and New York, told GlobeSt.com that many shoppers are now sitting on their hands due to economic uncertainty, but they are expected to actually capitalize on additional inventory coupled with moderate interest rates.

“At 5.5% for a 30-year fixed rate, mortgage rates are actually down from last month, but that won’t last long. As the next Fed meeting nears, they will likely rise in anticipation. My advice to shoppers is to lock in their rate now and start shopping. It’s been a while since shoppers have been in the driver’s seat and now is the time to take your power back.

Fairweather added: “I advise sellers to engage: if you decide to sell, do it quickly before demand drops further. And set a prudent price – now is not the time to test the waters. You will do more harm than good if you overprice and have to price cut or take the house off the market.