Why the housing market is becoming less competitive

Homeowners are increasingly listing their properties for sale, but properties are taking longer to sell as would-be buyers face high prices and interest rates.

Home sellers’ new listings surged in May, up 13% from a year ago, according to Zillow’s latest market report.

“We’re seeing more sellers coming back into the market,” said Orphée Divongay, senior economist at Zillow.

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But with buyers not returning to the market, many of the new listings are just adding to inventory: The number of homes on the market is up 22% compared to last year, according to Zillow research.

“Sales aren’t keeping up with the influx of homes coming on the market, so homes are staying on the market a little longer,” DiBongee said.

Nearly two-thirds, or 61.9%, of homes for sale in May remained on the market for at least 30 days without a deal, according to a new analysis from Redfin. About 40.1% of homes for sale in May remained on the market for at least two months without a deal, according to Redfin’s research.

“The market is slowing. Homes are taking longer to sell and inventory is building up on the market,” said Daryl Fairweather, chief economist at Redfin.

But despite the recent surge in supply, “the market remains short on inventory in the homes for sale market,” DiBongee said. U.S. housing inventory remains 34% below pre-pandemic levels, according to Zillow.

“We’re short about 4.3 million housing units across the country,” he said. “We’re still short of housing.”

High mortgage rates, combined with the difficulty of buying a home and the strain on household finances, are preventing buyers from entering the market, Divengy explained.

“Buyers are facing incredibly high mortgage rates, at least compared to what they’ve seen during the pandemic,” Fairweather said, and he believes homebuyers may lack the willingness and financial ability to purchase a home.

According to data from Freddie Mac via the Federal Reserve, the 30-year fixed-rate mortgage in the United States fell to 6.95% on June 13, down from 6.99% a week earlier.

Mortgage rates could change “pretty suddenly” or “in the blink of an eye,” but buyers are unlikely to see big swings in the near term, Fairweather said. The Fed left rates on hold at its June meeting and is expected to cut rates just one more time this year. It next meets on July 30-31.

“For homebuyers who are undecided about whether to wait, there’s no right answer,” Fairweather said. “It’s a matter of luck as to when mortgage rates will fall. No one knows when that will happen, so it’s hard to plan your life around it.”

Some US markets have seen a big increase in unsold inventory. In Dallas, Texas, about 60.5% of homes for sale have been on the market for at least 30 days, up from 53% a year ago, according to Redfin.

In Fort Lauderdale, Florida, 75.5% of homes remain on the market for more than 30 days, up from 68.2% a year ago, according to Redfin research.

Two other Florida regions have seen similar increases: In Tampa, 68.7% of homes remain on the market for 30 days, up from 61.9% a year ago, and in Jacksonville, the percentage has risen to 69.2% from 62.9% over the same period, according to Redfin data.

“Giving buyers more choice means they have more negotiating power,” DiBongi said.

If you notice that homes for sale in your area are lingering on the market for too long, you might be thinking, “Maybe. [a property] “You can buy it for less than list price,” Fairweather said.

If going through the home inspection process reveals issues that weren’t noticed or disclosed during the initial viewing, it may be worth asking the home seller to make repairs, she said.

But don’t go overboard: “Don’t get too hung up on the little things and ask for repairs on everything, like peeling paint,” Fairweather says.

Divongay said housing inventory remains tight in other markets, which still favors home sellers, as many homeowners not only have record-high home equity but also low mortgage payments.

If home sellers have upcoming life changes that require them to move later this year and there are a lot of unsold properties in their area, they may need to be prepared to lower their asking price to attract interest.

“Price reductions sell homes,” he said.