Alert! The U.S. housing market has become the modern-day Houdini, performing a vanishing act with inventory at a decade low. Our friends at Redfin report a 7.1% drop in the number of homes for sale compared to last year. This magician’s trick has left homebuyers and sellers asking, “Where did all the houses go?” Let’s peek behind the curtain and decode this illusion.
Act 1: The Pandemic Pulls a Fast One
Our homes were the safest places during the pandemic, and they’ve stayed that way too well. Due to uncertainty, potential sellers taking a raincheck caused the housing market to pull a disappearing act, resulting in a severe shortage. Compared to May 2019, there’s been a 38.6% decline in available properties.
Act 2: Mortgage Rates – The Invisible Hand
In 2020 and 2021, low mortgage rates triggered a homebuying frenzy, leaving the inventory shelves practically empty. And now, with mortgage rates playing hard to get, we’re seeing a reluctant replenishment. Most homeowners cherish their low speeds (below 6% for 90% of homeowners and 5% for 80%). The 30-year fixed mortgage rate has vaulted to 6.43% in May, up from last year’s 5.23% and soaring above 2021’s rock-bottom 2.65%.
Act 3: Stable Housing Prices – The Unmoved Audience
Despite the excellent disappearing act and stubborn mortgage rates, housing prices have stayed put, proving they aren’t susceptible to this trickery. The median U.S. home sale price in May was $419,103, just 3.1% shy of last year’s record $432,311. Prices are maintaining their ground thanks to the seesaw of low inventory and unyielding buyer interest.
Behind The Scenes: The Market’s Multiple Personalities
Like a magician with many tricks, the housing market isn’t uniform. Cities like Austin, Boise, and Oakland, which had a price party during the pandemic, are seeing a price hangover now. Meanwhile, budget-friendly towns like Hartford, Rochester, and Cincinnati enjoy a price uptick, charming buyers looking for more bang for their buck.
The Final Act: Future Uncertainty
Is the act over, or are there more tricks in store? Redfin’s Chief Economist, Daryl Fairweather, finds it’s too early to call it. If the Fed waves its magic wand and mortgage rates rise, buyer demand may cool, leading to slight price declines. But don’t expect a replay of the 2008 housing crisis. This act is far more sophisticated.
Curtain Call: The Grand Finale
As the curtain drops on this great vanishing act, the U.S. housing market is at a significant inventory low. COVID-19 and high mortgage rates have held potential sellers, hostage, while regional price variations keep buyers on their toes. As the show continues, homebuyers and sellers must stay in the loop and adapt their strategies to navigate this intriguing act.
