Talk of a soft landing seems to be everywhere of late, as pundits ponder whether the Fed’s rate hikes can strike that tricky balance between cooling inflation without plunging the economy into a recession.
While it’s still too soon to say what will happen, many may also wonder: Does this hoped-for soft landing apply to America’s housing market, too?
So far at least, the U.S. housing market has been having a crummy summer that feels anything but soft for both homebuyers and sellers.
In July, homeowners mostly opted to sit tight and ride out the tough market conditions rather than list their properties for sale. That meant house hunters had slimmer pickings to choose from—40,000 fewer homes across the U.S., according to the latest monthly data from Realtor.com®.
“Sellers are still on the sidelines, locked in to lower interest rates with low expectations of rates improving significantly over the next year,” Realtor.com Chief Economist Danielle Hale notes in her report.
It all adds up to a housing market stuck in limbo, with would-be buyers and sellers watching and waiting, hoping things change in their favor.
Inside the housing market’s summer slump
For now, homeowners seem resigned to waiting for market conditions to change.
In July, according to the report, the number of newly listed homes entering the market was a whopping 20.8% lower than last year. For buyers, that meant that the total number of homes for sale (both new listings and old) was 6.4% lower than last year.
Among the 50 biggest metro areas in the U.S., the inventory of homes for sale is now just half what it was in the years before the COVID-19 pandemic.
Meanwhile, it’s safe to say that no one is happy with home prices. Listing prices, or what sellers hope to get, are ticking lower—down 0.9% in July compared with last year—to $440,000. And the median sale price, or what’s agreed to in contracts, was also down, by 1.6% compared with last year.
For buyers, “Any relief is welcome, but let’s put it in context. This is a small bit of relief, not a huge discount,” says Hale.
Plus, she warns, “We don’t know how long it will last.”
Buyers are also contending with mortgage rates that have stayed higher for longer than most people expected or wanted. This has ratcheted up the cost of financing 80% of the typical home by 15.9% compared with July of last year, which amounts to an extra $317 per month.
Why the pace of home sales is slowing
Fewer homes at higher costs have understandably slowed the market. The typical home spent 45 days on the market this July, which is 12 days longer than the same time last year.
For homebuyers accustomed to seeing homes fly off the market in a matter of hours, this longer pace means they have time to let properties sit a while before deciding to pull the trigger.
However, from a big-picture perspective, homes are still spending 12 fewer days on the market than they did in the pre-pandemic era, suggesting everyone is having to move relatively quickly compared with in the past.
So as summer wanes, buyers might face a more existential question: Should I keep trying?
“This is not the time to hurry up and buy,” says Hale, but she definitely does not think buyers should give up entirely.
“Can you find what you need from the housing market and can you afford it? If you can, then it makes sense to keep looking,” she says. “Don’t try to time macro factors. If you’re always waiting for the right moment, you could end up waiting forever.”
Get more on Realtor.com
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