The US housing market faced a setback in May as the number of available homes for sale reached record lows, according to Redfin Corp., a leading real estate brokerage. On a seasonally adjusted basis, active listings dropped by 7.1% in May and were down by a significant 38.6% compared to pre-pandemic levels. Redfin reported that only 1.4 million homes were up for sale in May, marking the lowest figure in their records dating back to 2012.
One contributing factor to the shortage of homes on the market is the reluctance of homeowners to move due to the trade-off of a higher mortgage rate. As interest rates continue to rise, the average 30-year-fixed rate reached 6.43% in May, up from 5.23% the previous year and more than double the 2.65% rate in May 2021.
The limited supply of homes for sale has resulted in price increases in certain areas. In May, nearly half of the offers received by Redfin were met with multiple bids, and over two-thirds of sold homes went for prices above the listed price.
Among the 50 largest metros, Redfin’s data for the four-week period ending June 11 revealed a decline in home-sale prices in 31 of them. The metros with the biggest 12-month price drops were Austin (-13.1%), Las Vegas (-9%), Oakland (-7.4%), Phoenix (-6.9%), and Los Angeles (-6.7%).
Pending home sales also experienced a significant decline of 17.1% year over year, marking the largest drop in over four months. This decline was observed across all 50 metros, with the steepest dips recorded in Providence (-31%), Portland (-29%), Milwaukee (-28%), Seattle (-27%), and San Diego (-27%).
Moreover, there was a 23% decrease in new listings of homes for sale compared to the previous year. The areas that experienced the most significant drops in new listings were Phoenix (-41%), Las Vegas (-41%), Oakland (-40%), Seattle (-36%), and Orange County (-35%).
To help address the high prices and scarcity of listings, new construction projects could provide some relief. In an unexpected turn, US housing starts saw a surge in May, surpassing expectations and marking the largest increase since 2016. Additionally, applications for building permits saw a 5.2% increase, indicating potential future construction activity.
It is worth noting that Jonathan Lansner of the Southern California News Group contributed to this report.
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