Redfin Corp., a real estate brokerage firm, reported a significant decrease in the number of homes available on the market in May. This decline, reaching record lows, is primarily attributed to the persistent influence of high mortgage rates, which are discouraging people from considering residential moves.
In May, there was a 7.1% decline in active listings on a seasonally adjusted basis, with a significant drop of 38.6% compared to pre-pandemic levels, according to Redfin’s Housing Market Tracker. The real estate brokerage firm noted that the number of available homes for sale in May was only 1.4 million, marking the lowest recorded figure since their records began in 2012.
Due to the increase in interest rates, many homeowners are choosing to remain in their current residences, as moving would require them to give up their more affordable mortgages. Redfin reported that the average 30-year fixed rate rose to 6.43% in May, a significant increase from 5.23% compared to the previous year and more than double the 2.65% rate observed in May 2021.
The limited supply of homes for sale has resulted in price hikes in certain markets. In May, nearly half of Redfin’s offers encountered bidding wars, while over two-thirds of the sold homes were purchased above the listed price. These trends indicate the high demand and competitive nature of the housing market, contributing to increased prices in many areas.
However, the construction of new homes has the potential to alleviate the issue of high prices and the scarcity of listings. Surprisingly, housing starts in the United States reached their highest level since 2016 in May, as per government data. This increase in new construction indicates a positive development that could help address the challenges faced by the housing market.
The upcoming announcement on Thursday will reveal the existing home sales figures. It is anticipated that there may have been a slight decrease in May, with an estimated annualized pace of 4.25 million, compared to April’s 4.28 million, as reported by Bloomberg Economics.
