BAM Key Details:
- Realtor.com has released its Monthly Housing Trends Report for April 2023, revealing how a lack of sellers is impacting the spring housing market.
- Low inventory is making it harder for buyers to find affordable homes.
The lack of sellers in this year’s spring housing market is creating a stew of challenges for buyers in search of affordable homes. That’s according to the April edition of Realtor.com’s Monthly Housing Trends Report.
Buyers in the U.S. housing market are contending with low housing inventory and high mortgage rates. While up from a year ago, the supply of for-sale homes is still well under pre-pandemic levels, mainly because fewer sellers are choosing to list their homes (-21.3%) compared to April 2022.
Also, while listing prices rose 2.5% in April, annual price growth has slowed for 10 months in a row and could show a year-over-year decline later this spring.
A lack of new sellers and homes for sale continues to limit buyers’ choices and home sales. Many sellers are likely future buyers too, which may be why a majority of would-be sellers report feeling ‘locked in’ to their current home because of a low mortgage rate, especially younger homeowners. But older seller-buyers, who are likely to have a smaller mortgage balance and built up greater equity, are less likely to report feeling locked-in by a low interest rate and are more likely to report that they need to sell anyway. This likely means that older households will continue to play a prominent role on both sides of the home sale transaction this year.
Top concerns for sellers: buying before selling, market conditions, and repairs
According to a recent Realtor.com site survey, here are the top concerns sellers have about the housing market:
- Buying their next home—with 34.2% of sellers indicating this was a major concern when considering whether to sell their current home.
- Housing market conditions—including local buyer demand and whether or not they’ll receive any good offers—were cited by 19% of survey respondents, nearly twice the share recorded a year ago and the highest since 2019.
- The cost of making repairs and upgrades to give their home its best shot at a good offer, with inflation driving up the cost of home improvements and household furnishings.
It’s become increasingly challenging for many people to become homeowners, and longer-term homeowners who have built equity over many years are likely in the best position to sell and buy in today’s market. To get top dollar for their home and set themselves up for success, all sellers still need to make sure their home is in the best possible condition and shows well. That could include making upgrades, investing in necessary repairs, and painting the home. First-time and younger buyers can still win in this market by watching mortgage rates closely, setting online alerts for any new homes coming on the market, and working with an agent who really knows the market and how best to position an offer.
Lack of sellers and new listings makes the market more challenging for buyers
According to the April report, the supply of active listings in the U.S. was up from a year ago but increased at a slower pace for the second consecutive month. Also, despite the increase, the inventory of for-sale homes remains 50.5% lower than the April 2019 pre-pandemic level.
The declining supply of new listings—due mainly to the number of sellers opting to sit on the sidelines rather than list their homes—means potential buyers have fewer options to choose from and will likely have to lower the bar to find and get into a home.
Here are some of the stats behind the discouraging shortfall of for-sale listings:
- Active listings grew 48.3% year over year in April, but the inventory growth rate continued to decelerate for the second consecutive month. Active listings grew in all major U.S. regions—and in 42 of the 50 largest markets—while the Southern region took the lead with a 100.3% annual increase.
- New listings fell 21.3% year over year nationwide and in 49 of the 50 largest U.S. markets. Only San Antonio, TX, saw an annual increase in new listings (+0.4%).
- Pending listings—homes that went under contract—fell 22.5% year over year.
- Despite the growth in active inventory, most metros had fewer for-sale homes compared to before the pandemic. Only Austin, TX, saw an increase (+4.3%) in April compared to pre-pandemic levels (2017-2019).
- Meanwhile, in Las Vegas, where active inventory numbers were above pre-pandemic (2017-2019) levels in March, they were 8.1% below those levels in April.
Home prices climb, though more slowly, as spring home buyers enter the market
National home listing prices rose slightly in April, compared to a year ago, which is consistent with the usual uptick in the spring. But home price growth decelerated to the lowest rate since April 2020.
The national median list price rose to $430,000 in April—up from $424,000 in March—while list annual price growth decelerated to 2.5% year over year.
Mortgage rates and home prices are still higher than a year ago, which has increased monthly housing costs by $340 (+19.0%) compared to a year earlier (assuming a 20% down payment). That 19% growth rate far exceeds recent rent growth (+2.5%) and inflation (+5.0%), but it’s a significant drop from last month’s 39.3%.
Because many sellers are listing their homes at higher prices—as home prices generally continue to rise—the share of homes with price reductions reached 12.2% in April, up from 6.8% a year ago but still lower than pre-pandemic levels.
Among the 50 largest metropolitan areas in the U.S., large southern metros saw the biggest surge in the share of homes with price reductions, and nine of them saw declines in median list prices.
The top three metros with the biggest annual price declines:
- Austin (-8.8% year-over-year)
- Las Vegas (-7.1%)
- Houston (-4.6%)
Time on market increases as the pace of homebuying remains low
Consistent with seasonal trends and the usual uptick in sales as spring approaches, the number of days a home spends on the market before going under contract has continued to decline since January. That said, in April 2023, homes spent considerably more time on the market compared to the previous two Aprils.
The typical home spent 49 days on market in April—up more than two weeks (17 days) from a year earlier but 12 days fewer than the pre-pandemic average for April 2017-2019.
Across the 50 largest metros, time on market was 41 days on average in April, eight days fewer than the national pace but up 15 days from the previous April. All 50 metros saw an increase in days on market compared to a year ago.
Top three markets with the biggest increase in days on market:
- Raleigh (+39 days)
- Kansas City (+32 days)
- Austin (+30 days)
Top takeaways for real estate agents
In a market like this one, with fewer sellers and new listings, you need to be having daily conversations with lenders (plural) to help your buyers in their search for the best value.
Also, be prepared to help them identify which characteristics are must-haves and which are nice-to-haves. They may have to revise that list, depending on what happens with mortgage rates and home prices in the weeks ahead.
For your sellers, be prepared to counter the misconceptions they have, thanks to misleading headlines, and to help them see why this is the best time to sell.