Buyers And Sellers Both Make Concessions As Market Rebalances

Housing inventory is increasing as mortgage rates are locking some buyers out of the market, but re-balancing comes with sacrifices for both buyers and sellers.

Redfin reported that there were 2.9 months of home supply during the four weeks ending September 11. This is up from 1 month a year ago and the highest level since June 2020.

Less than four months’ supply is typically considered a seller’s market, while four to six is a balanced market and six or more is a buyer’s market. The pandemic seller’s market peaked at a 1.8 months supply.

In May, supply sat at 2 months, meaning the surge to 2.9 in September has happened quickly. Interest rates have skyrocketed since the beginning of this year, which likely impacted the speed with which inventory increased.

The median mortgage payment is now $2,100, up 66% from the same time last year. That number does not include additional expenses such as HOA fees and property taxes.

Some workers are wondering what happened to the American Dream of earning enough from a nine-to-five job to buy their own home. 

According to officials at the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, the median sales price of a new home in July 2022 was $439,400.

The thumbnail measurement for home affordability is a house that costs roughly 2.6 years of your household income, or a 2.6 “price-to-income ratio.” Using the 2.6 price-to-income ratio, your household’s earners would need to bring in $169,000 a year to be able to afford a new home.

That is higher than most U.S. households, as the census bureau reports that between 2016 and 2020, the median household income was $64,994.

Are interest rates to blame?

“I think these rates have absolutely put a ceiling on many Americans’ ability to afford a home, and I think it’s particularly challenging for first-time homebuyers,” Manager of Economic Research George Ratiu told Fox News.

Interest rates surpassed 6% last week for the first time since 2008.

The lack of inventory isn’t helping.

Inventory isn’t making a smash comeback. In fact, active listings declined in the same four-week period by 1.7%. Sellers are backing out of the market even as more homes become available, reluctant to sell for less than they could have made last year.

Some sellers are also afraid of losing the low-interest rates they locked in during the pandemic by buying a new home at current rates.

“Homebuyers have more power than they’ve had since the ‘before times.’ Unfortunately, it’s increasingly hard for buyers to make use of their newfound power thanks to the affordability pressures of rising mortgage rates and a dearth of homes being listed for sale,” said Redfin Deputy Chief Economist Taylor Marr. 

“A true buyers market would have more homes for sale than there are buyers, with a wide variety of homes for sale by style, price, and location so when a buyer finds the home that matches their preferences they face little competition and can offer under asking price with healthy inspection and financing contingencies in place. Today’s average buyer is paying less than the list price, but they continue to struggle to find a home that meets their criteria and budget.”

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Email story ideas to Editor Kimberley Haas: [email protected]