Real estate agent Sean Dycus says one of his clients, a 67-year-old postal worker, is looking this spring to buy her very first home after renting her entire life. But the market is unrelenting.
“She’s …offering almost her entire nest egg of cash and she’s still looking at $2,200 a month for a $350,000 home,” the real estate agent at Mainstreet Properties in Charleston, S.C., told Yahoo Finance.
“We’ve been going back and forth for weeks with different builders and sellers trying to get her something nice,” he said, “something she likes.”
She’s probably not the only buyer struggling to purchase a home this spring.
After a winter of sellers offering price discounts and other incentives, buyers are now finding far fewer options and little room to negotiate, as inventory levels have yet to improve — despite somewhat softer mortgage rates.
As of April 17, there were only 66,000 new listings of single-family homes nationwide and 25% are already under contract, according to Altos Research. That’s far fewer than last year, when there were 100,000 new listings and 30% of them were under contract immediately.
That means buyers again are facing a frustrating housing market.
“So yes, demand is lighter than the insanity of last year. But the quantity demanded exceeds the quantity supplied,” Mike Simonsen, CEO of Altos Research wrote in a blog post. “There are plenty of buyers competing for the limited supply of homes on the market.”
Fewer homeowners listed this spring
While it may seem like a seller’s market, a growing share of homeowners are deciding against listing their house for sale — adding to inventory woes for buyers.
The number of single-family homes on the market across the country fell again the week of April 17 to 405,000, Altos Research found. While that’s 57% more than last year at this time, inventory continues to dwindle by the week.
“Inventory usually climbs for 20 weeks from mid-February through June 30. We’re halfway through the seasonal cycle and yet inventory is still falling,” Simonsen wrote.
One reason potential sellers are opting to forgo listing is that they simply don’t want to give up their current, ultra-low mortgage rate to buy in a competitive market with higher rates.
Over 90% of those with a mortgage have a mortgage rate below 5.50%, according to Fannie Mae Chief Economist Doug Duncan. At least 70% have rates below 4.50%. Why trade that in for a 30-year fixed rate mortgage at 6.39%, where rates sit now?
“They’re just not going to want to give those mortgages up anytime soon,” Duncan told Yahoo Finance. “That means all of those houses are not candidates to be listed in the equation.”
At the same time, homebuilders have been behind the demand curve for new home construction for years – and the Federal Reserve’s moves to curb inflation has made it worse.
“Builders had been increasing supply until interest rates rose, then construction plateaued because interest rates have risen as far as they have,” Duncan said.
Opportunities to negotiate fade
For those sellers still in the market, they are finding their edge as buyers lose advantages they briefly had in the winter months.
At least 29.8% of active homes on the market have taken a price cut for the week of April 17, Altos Research found, down 40% from the start of the year.
Builders, also, were slightly more optimistic in April, as limited resale inventory lured buyers to the new home market. According to the National Association of Home Builders, one-third of housing inventory is new construction, compared with historical norms of about 10%.
Fewer builders are offering price reductions, too. Thirty percent of builders reduced their home prices in April, down from 31% in March and February and 35% in December. The average price reduction was 6% in April, down from 8% in December.
Still, 59% of builders have been offering incentives – though that time may be running out as well.
“Builders are negotiable, they’re giving incentives,” Dycus said. “But as inventory tightens up, there are builders already cutting concessions. A lot have cut them in half already.”
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
Read the latest financial and business news from Yahoo Finance
