Home listings fall, price cuts and removals surge due to rate hikes

The interest-rate surge this year has altered the dynamics of the housing market, as new listings dwindle while at the same time, sellers are cutting prices or pulling their property off the market, according to data from HouseCanary.

The number of net new listings placed on the market in September dipped to 236,971, down 29.6% from one year earlier, the real estate brokerage and data provider said in its latest Market Pulse report. For the trailing 12-month period that ended Sept. 30, the number of net new listings declined by 7.6% compared with a similar time frame over the previous year.

Although fewer homes are currently being listed, the changing dynamic means the sluggish consumer demand has generated minimal price growth. Sellers are needing to compete on price to attract buyer interest, the report said. The volume of for-sale homes with price drops during the same 12-month period increased by 83.2%, while listings removed from the market altogether grew 51%.

"The most recent round of rate increases has continued to cause a shift in supply-demand fundamentals by impacting demand and creating a flat price-growth environment," said HouseCanary Co-founder and CEO Jeremy Sicklick in a press release. Potential buyers are reacting differently to rate movements than they did just a few months ago, he added. 

"While the continued supply shortage remains significant, the recent round of increasing rates is taking a bigger toll than those occurring earlier this year," Sicklick said. 

While a housing-supply shortage might typically cause prices to accelerate — as they did to record highs earlier this year — the pace of rising interest rates have severely impacted what buyers are able or willing to pay for a new home. The latest 30-year average is more than double where it was one year ago, according to Freddie Mac's latest data. 

As a result, many current homeowners are finding little incentive to leave their current residences for something new.

"Compared to the rate increases in the spring, the market is starting at a different baseline with no momentum to subsequently absorb the slowing of the market volume and price growth," Sicklick said.

The supply of for-sale homes on the more affordable end of the market, particularly, has taken a hit when compared to higher-price ranges. The yearly volume of net new listings for properties priced up to $200,000 decreased 26.1% at the end of September, while homes between $200,000 to $400,000 saw a 16% decline. But at the higher end, net new listings between $400,000 to $600,000 grew 7.1%, and for the $600,000 to $1 million range, volume increased 11.6%.

Meanwhile, recent data from several sources now show the first signs of monthly price decreases. HouseCanary found the median price of single-family listings nationwide coming in at $433,070 in the last week of September. While the value was a 12.5% annual price gain, it was 0.7% below late August's median. 

Monthly contract volumes, likewise, have fallen off, the report indicated. In September, 284,611 listings went under contract across the country, a year-over-year 18.9% decrease and 9.9% below August's number.

Current trends appear unlikely to change direction soon, according to HouseCanary, unless interest rates reverse course soon, an outcome few are predicting. 

"The increasing rates are expected to continue to negatively impact the market: creating even lower contract volume and putting additional downward pressure on prices," Sicklick said.