For the first time since 2019, experts predict housing supply will begin to show a year-on-year increase in the coming weeks as more homes become available for sale in the United States.
New figures collected by real estate website Realtor.com suggest that the US housing market may soon begin to grow. April data shows that smallest annual decline in the number of available properties since the end of 2019sign that the market is moving in the right direction for buyers.
High interest rates, which dictate the interest rate on mortgages, are thought to have made expensive homes particularly expensive and may have prompted sellers to act. For much of the pandemic, people have been extremely reluctant to sell their homes due to economic uncertainty and the logistical issues of managing a property sale amid covid-19 restrictions.
Danielle Hale, chief economist at Realtor.com, told CNBC: “April data suggests a positive turn of events on the horizon for weary shoppers: If the trends we are currently seeing hold, we could potentially see year-over-year inventory growth in the coming weeks.
Why does this affect housing supply?
To combat the dizzying inflation rate of recent months, interest rates have been increased at all levels. The high interest rate encourages consumers to save rather than buy immediately, which lowers the demand for goods and services and lowers the price.
However, in the housing market, the effect has been a sharp rise in mortgage rates; the average rate for a 30-year fixed-term contract has increased by 2.5 percentage points since the start of 2022. This means that properties now stay on the market longer, rather than being purchased immediately. The high interest rate on mortgages discourages short-term buyers and gives the market a chance to regroup.
This effect can be seen in the rising cost of housing prices over the past two years.
Since the start of the pandemic U.S. home prices are up about 34%, excluding many potential buyers. Realtor.com says the average monthly payment on a $400,000 home with a 20% down payment is now $467 more than March 2020.
The next change in the housing market could be crucial as we are now in the most popular times of the year for property purchases. Despite the resurgence in housing supply, Black Knight calculations suggest homes are less affordable in 95% of U.S. housing markets, compared to their historical averages.