The US housing market is grappling with a critical issue - a shortage of homes available for purchase. A recent report attributes this challenge to the increasing mortgage rates, which are impacting not only potential buyers but also sellers.
Higher borrowing costs have deterred potential buyers, and sellers are holding back during the spring season as well. In April, the number of new listings dropped by 21% compared to the previous year and fell by 31% compared to 2019, as reported by Realtor.com.
The crux of the problem lies in potential sellers feeling "locked in" due to the possibility of having to take on mortgages at significantly higher rates than their current ones. This hesitation stems from the surge in mortgage costs as the Federal Reserve raises interest rates. Mortgage rates have been above 6% since September 2022, which has led to a cooling of the housing market that previously experienced explosive growth during the pandemic.
The boom in the housing market saw bidding wars and cash purchases pushing prices to record levels. However, the current scenario is different, with homes remaining on the market for longer periods and price growth slowing down. In April, the number of homes under contract decreased by 23% compared to the same month a year earlier. The national median listing price in April was $430,000, a 2.5% increase compared to the previous year, marking the slowest rate of growth since April 2020, as per Realtor.com data.