Housing market starting to shift back to buyers

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The housing market is showing small, but significant, indicators that the balance is shifting back towards buyers from sellers, Redfin said.

Its seasonally-adjusted Homebuyer Demand Index was down 9% year-over-year during the week ending May 29. This was the seventh consecutive decline in the index, which measures requests for tours and other homebuying services from Redfin agents. The surge in mortgage rates is one of the primary reasons for consumers edging away from the market.

Meanwhile, the homes for sale inventory climbed to a new high for this year, to 608,841 in May. 

However, this marked a 10.1% year-over-year decline, and the smallest drop since April 2020, early in the pandemic.

"Mortgage rates are now stabilizing and homes remain in short supply, so while we do expect home-price growth rates to decline, we don't expect prices to fall much at the national level," said Redfin Economics Research Lead Chen Zhao in a press release. "For homebuyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up."

Market conditions are why Fannie Mae's Home Purchase Sentiment Index reached a two-year low in April. That was driven by more than three-quarters of survey respondents declaring it a bad time to buy a home.

Touring activity from the first week of January through May 29 was 27 percentage points behind the same period in 2021, according to ShowingTime data cited by Redfin.

April had an average of 8.49 showings per property listing, down 12.1% from March and 10.7% one year ago, according to ShowingTime's own press release.

The month-to-month drop was rather unusual. Typically showing activity during the month matches March levels.

"But this year, April traffic was slower across all markets, pointing to competition softening," said ShowingTime Vice President and General Manager Michael Lane. "It contrasts with last year's dynamic, when demand reached a feverish peak in April."

The median sales price for the four weeks ended May 29 was $400,999, up 16% year-over-year, Redfin said. The median asking price of newly-listed homes increased 17% to $412,450.

As a result, the monthly mortgage payment on a home with a median asking price was $2,391 based on the 5.09% mortgage rate from the most recent Freddie Mac Primary Mortgage Market Survey. That payment size was up 40% from $1,710 a year earlier, when mortgage rates were over two percentage points lower at 2.99%.

During May, real estate agents and sellers placed 332,965 net new listings on the market, a 16.6% decrease year-over-year, a HouseCanary report said.

The largest drops in inventory were at the lower end of the market, with home listings priced under $200,000 down 27.4% compared with May 2021. Listings in the $200,000 to $400,000 tier were down 26.9%.

Homes for sale in the $400,000 to $600,000 price range had an inventory decline of 8.7%. On the other hand, properties on the market priced between $600,000 and $1 million were virtually flat compared with May 2021, while those over $1 million had a 5.4% increase in listings.

Listings that entered contract in May dropped by 10.9% versus one year prior, a sign that the market is cooling, said HouseCanary CEO Jeremy Sicklick in a press release.

"Even so, pent up demand still exists in the market currently," Sicklick said. "Over the next few months, we expect to continue to experience short supply and low single digit price growth."