The spring housing market has not been kind to homebuyers. After a winter of discount offers and incentives from sellers, buyers now find themselves with fewer options and little room to negotiate as inventory levels remain low despite softer mortgage rates.
As of April 17, Altos Research reports that there are only 66,000 new listings of single-family homes nationwide, with 25% already under contract. This is significantly less than last year's 100,000 new listings, with 30% under contract immediately. Thus, buyers are facing a frustrating housing market yet again.
According to Altos Research CEO Mike Simonsen, "there are plenty of buyers competing for the limited supply of homes on the market."
One of the reasons for this limited supply is that a growing number of homeowners are choosing not to list their homes for sale, adding to the inventory woes of buyers. The number of single-family homes on the market across the country fell again during the week of April 17 to 405,000. Although this is 57% more than last year, inventory continues to dwindle by the week.
Another reason for the low inventory is that many homeowners with ultra-low mortgage rates are hesitant to give up their rates and buy in a competitive market with higher rates. Over 90% of those with a mortgage have a mortgage rate below 5.50%, with 70% below 4.50%.
Meanwhile, homebuilders have been struggling to keep up with the demand curve for new home construction for years. The Federal Reserve's moves to curb inflation have only made it worse, leading to a plateau in construction.
For sellers still in the market, opportunities to negotiate are fading. At least 29.8% of active homes on the market have taken a price cut for the week of April 17, down 40% from the start of the year. Builders, too, are offering fewer price reductions. Only 30% of builders reduced their home prices in April, down from 35% in December. The average price reduction was 6% in April, down from 8% in December.
Although 59% of builders have been offering incentives, that time may be running out as well. As inventory tightens up, builders are cutting concessions, with many already cutting them in half.
In conclusion, the spring housing market is looking bleak for buyers due to the low inventory levels and the hesitancy of sellers to list their homes for sale. While homebuilders are slightly more optimistic, opportunities for negotiation are fading, making it a challenging market for buyers to navigate.
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