Paul Sakuma/AP
- Just 1% of US homeowners sold their home in the first half of the year, leading to the lowest inventory on record.
- Higher mortgage rates have made owners reluctant to sell and give up lower rates they locked in years ago.
- Mortgage rates will need to drop to around 5% to unlock more inventory, experts say.
Just 1% of existing homeowners sold their house in the first half of 2023, helping to drive the number of available homes for sale to the lowest level ever.
Just 14 out of every 1,000 existing homes in the US were sold during the first-half of the year, the lowest turnover rate the housing market has seen in over a decade, according to a new Redfin report. Buyers now have 28% fewer available listings to choose from than they did prior to the pandemic, with 19 out of every 1,000 homes being sold in the first-half of 2019.
That's a major reason why US housing supply hit an all-time low last month. Available homes on the market slumped to an unprecedented 1,318,154 in June, representing a 15% decline from supply levels last year.
The dearth of inventory has largely been driven by higher mortgage rates, as most existing homeowners cling to the historically low rates they locked in over the last 15 years.
That means the pandemic housing boom has depleted much of the available supply of homes for sale, as 90% of homeowners with mortgages now have an interest rate below 6%, Redfin said in a previous report.
"The quick increase in mortgage rates created an uphill battle for many Americans who want to buy a home by locking up inventory and making the homes that do hit the market too expensive," Redfin deputy chief economist Taylor Marr said in a statement on Tuesday, noting that home prices are around 40% higher than they were prior to the pandemic.
A shortage of supply has propped up home prices over the past year, despite high rates weighing on demand. Median prices are nearing a record-high, clocking in at $426,056 in June, just 1.5% below the record median home price of $432,397 in May 2022.
"Mortgage rates dropping closer to 5% would make the biggest dent in the affordability crisis by freeing up some inventory and bringing monthly mortgage payments down," Marr added.
But experts don't expect rates to dial back significantly anytime soon. Mortgage rates are influenced by real interest rates in the economy, which are expected to remain elevated this year as the Federal Reserve continues to stay hawkish on inflation.
Previously, Marr said he anticipated rates on the 30-year fixed mortgage to ease to just 6% by the end of the year. That's just one percentage point lower than current levels, with the average 30-year fixed mortgage rate rising to 6.96% the last week, per Freddie Mac data.