The Impending Challenges of House Hunting in a Shrinking Market
For anyone searching for a home, the options are increasingly limited and set to shrink even further. Recent data indicates a significant decrease in the number of homes available for sale, pointing to mounting challenges for prospective buyers.
According to Realtor.com, there was a 7% increase in homes for sale this month compared to June of the previous year, but the situation took a negative turn in the last week. New listings during the final week of June were down by a staggering 29% compared to the same week last year.
The surge in mortgage rates has left homeowners with little incentive to sell their properties. According to Mortgage News Daily, rates on 30-year fixed mortgages crossed the 7% mark again. Since a majority of homeowners with mortgages enjoy rates below 4%, and some even below 3%, they are reluctant to put their homes on the market. This factor exacerbates the scarcity of available properties.
The tightening housing market is expected to keep home prices upward. Although prices peaked last June, witnessing a remarkable 45% increase from pre-pandemic levels, they experienced a decline due to the rapid rise in mortgage rates. However, according to the latest S&P Case-Shiller home price index, prices bottomed out in January, demonstrating resilience despite higher interest rates and slower sales.
Pending sales, which measure signed contracts on existing homes, experienced a nearly 3% decline in May compared to April, as reported by the National Association of Realtors. Despite this sluggish trend, the housing market remains resilient, with an average of approximately three offers for each listing, according to Lawrence Yun, NAR's chief economist. However, the persistent lack of housing inventory continues to hamper the fulfillment of housing demand.
Although there has been an increase in single-family housing being built, they still fall significantly below historical levels. Builders have been underbuilding since the Great Recession, which means the market has been undersupplied even before the recent surge in demand caused by the pandemic.
House hunting in today's real estate market presents unique challenges but armed with the right strategies, you can overcome them and find your dream home. By understanding the changing landscape, defining your priorities, and leveraging technology and expert advice, you'll position yourself for success. Remember, being proactive, well-prepared, and adaptable will make all the difference in your house hunting journey. Happy searching!