After sitting on the sidelines, sellers finally want to get rid of their homes

Fortune He once called the historically low pandemic-era mortgage rates a blessing and a curse. It’s true: there’s nothing better than a below-market rate, especially when there’s such a substantial difference, but it also keeps you stuck; It’s hard to give up a mortgage rate of, say, 3% for one of 7%, unless you have no other option.

It’s a phenomenon called the lock-in effect, and all year it has shown subtle signs of easing. Last year, existing home sales fell to their lowest point in nearly three decades because no one was selling or buying homes. But it looks like sellers are finally ready; The only thing is that buyers are not matching your energy. “Home sellers are returning to the market but are finding buyers hesitant,” Zillow chief economist Skylar Olsen wrote in a monthly housing report released yesterday.

“Buyers are not matching the uptick in seller activity,” Olsen reiterated. But how do we know that sellers are coming back? New listings increased about 8% in May and about 13% from a year ago. “The effects of ‘rate lock-ins,’ of homeowners holding on to their existing homes and low-rate mortgages, appear to be diminishing over time, even though most outstanding mortgages have rates well below what is currently quoted on the market,” he wrote. .

Still, there were fewer sales in May than last year; they were down 6%, according to Zillow. Separately, according to a Redfin analysis released today, pending home sales are down 3.5% from a year ago, the largest drop in more than three months, and its homebuyer demand index, that considers requests for tours and other services from Redfin agents. , is down 18% (the lowest level since February).

Either way, Olsen said, the drop in sales volume helped with a housing replenishment of sorts: The number of homes for sale was up 22% from a year earlier, when it was near a record low, and total inventory It is at its smallest level. deficit in three years, which basically means it is still a long way from pre-pandemic levels, down about 34%, according to Zillow.

Competition was not as intense last month, so home price appreciation cooled. In April, home values ​​increased 4.4% from a year ago, but in May they increased 3.9% (the monthly increase was also smaller). Slower house price appreciation is great for anyone looking to buy a home, but home prices are still 45% higher than before the pandemic.

“Zillow’s Market Heat Index shows the nation is becoming a little more buyer-friendly and heading toward ‘neutral’ territory, but sellers still have a slight advantage,” Olsen wrote. “Buffalo, Hartford and San Jose are the top markets for sellers among the 50 largest metropolitan areas. New Orleans, Miami, Jacksonville and Memphis are all leaning toward buyers, giving those in the market greater leverage in negotiations.” And nationally, nearly a quarter of homes for sale reduced prices, which is the highest proportion in the last six years.

All in all, it’s a much different and more expensive landscape for people looking to buy homes. Monthly, home prices increase in all 50 major metropolitan areas; annually, they increase in 46 metropolitan areas, according to Zillow. We already know that home prices are considerably higher since the start of the pandemic; Monthly mortgage payments are too. The typical monthly mortgage payment is 11.3% higher than last year and prepared for it: 115.3% since before the pandemic. So not only is the housing world more expensive than it was last year, it is a completely different entity than it was four years ago. It’s not hard to imagine why buyers are pulling back.

Mortgage rates have dropped a bit; daily rates are at 6.97% (the lowest in three months according to yesterday’s consumer price index report) and weekly rates are at 6.95%. According to Zillow, home price appreciation has also slowed. So maybe things are starting to look up for potential buyers?

“The latest inflation report is good for home buyers because it has already driven down mortgage rates, although this week’s Federal Reserve meeting will moderate declines in mortgage rates,” the economic research leader said in the analysis. from Redfin, Chen Zhao. “But on the other side of the coin, if lower mortgage rates generate more demand than supply, that could erase the possibility that home price growth will soften and drive prices up even further. “Lower rates and higher prices can ultimately cancel each other out when it comes to home buyers’ monthly payments.”

Still, if anything, the housing world is moving toward a balance of sorts, Zillow’s Olsen wrote.

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