Thursday, May 30, 2024

More homes are on the market than a year ago, but rising mortgage rates remain a hurdle for many

by Associated Press

LOS ANGELES (AP) — Mortgage rates have been mostly ticking higher lately, but it’s not all bad news for home shoppers.

Homebuyers have a wider selection of homes to choose from now than they had at this time last year, a trend that could help lead to more sales in a market still constrained by a thin inventory of properties.

In the first four months of this year, active listings — a tally that encompasses all homes on the market except those pending a finalized sale — were the highest since 2020, according to Realtor.com.

The most recent monthly snapshot showed 734,318 homes on the market in April. That’s 30.4% up from the same month last year. New listings, meanwhile, jumped 12.2%.

Some of the increase is seasonal, with more homes typically going on the market just before and during the spring homebuying season.

The pickup in inventory is good news for the housing market, which has been in a slump for two years, partly due to a shortage of homes for sale.

However, the inventory of available homes remains well below the pre-pandemic era. In April 2019 there were roughly 1.1 million homes on the market, or over 400,000 more than last month.

Many factors have contributed to this chronic shortage of homes for sale, including more than a decade of below-average new home construction and demographic trends that have led to homeowners hanging on to their properties longer. The large gap between current mortgage rates and where they were just a couple of years ago has also discouraged many homeowners who locked in rock-bottom rates then from selling.

While home shoppers have more listings to chose from, high mortgage rates remain a hurdle for many.

After climbing to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage stayed below 7% this year until last month, according to Freddie Mac. The average rate has been hovering slightly above that threshold since. When mortgage rates rise, they can add hundreds of dollars a month in costs for borrowers, limiting how much homebuyers can afford.

“If mortgage rates remain elevated over the next few months, the housing market may see a return to the holding pattern of scarce inventory, as we’ve seen over the past few years,” Realtor.com economists wrote in a recent report. “For buyers, that could mean fewer opportunities for finding their ideal home as summer approaches.”

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