CHM Blog

Open houses, closed wallets

It’s like having a party, but no one shows up. After what seems like an eternity of sparse listings, the inventory of homes for sale is finally rising, according to The Wall Street Journal’s Nicole Friedman. But buyers aren’t interested.

A Redfin analysis reveals the U.S. housing market had nearly a half million more sellers than buyers in April, the biggest such gap on record in seasonally adjusted data going back to 2013, The upshot of all this? It’s finally a buyer’s market after years of frustration with fast-rising prices and bidding wars. In many parts of the U.S., sellers are cutting prices or offering concessions such as paying for buyers’ closing costs.

“A historic shortage of homes for sale is a big reason why the housing market has been stuck near its slowest sales pace in three decades,” says Friedman, who sums it up by reasoning that buyers were frustrated with a lack of options, and desirable homes often sparked bidding wars.

For so many reasons, supply is rising. Some sellers are finally experiencing life events that force them to move, like a job relocation or having a baby, while others are unloading investment properties because their costs are rising or they’re worried that home prices will fall and want to sell before that happens, says many Realtors.

But all these new listings haven’t been enough to wake up the housing market. Existing-home sales in April fell for the second consecutive month, resulting in the slowest sales pace since April of 2009. Simply put, buyers are still priced out, with home prices up more than 50% in the last five years and mortgage rates staying stagnant at a rate that just won’t work for them. Throw a dose of economic uncertainty on top of that pile of issues and major purchases are discouraging even the most earnest of buyers.

“The mismatch between buyers and sellers is a sign that home prices could decline slightly on a national basis later this year,” reports Redfin’s Chen Zhao. “It doesn’t feel like buyer demand is going to come back that much. Prices are just too high.”

Friedman reports that while active listings are still about 14% below typical pre pandemic levels, they rose in May to the highest level since 2019 according to Realtor.com, which is operated by News Corp, which is the parent company of the WSJ.

The Southeast and Southwest represent the biggest buyers’ markets, with the inventory of homes for sale hovering above prepandemic levels. But the Miami metro area had almost three times as many sellers as buyers in April, Redfin said.

Some markets in the Northeast and Midwest still have more buyers than sellers, however, with Newark, N.J., leaning the most in sellers’ favor, according to Redfin. Home shoppers in many of those markets are still facing competition for properties.

As for homebuilders, activity in the U.S. plummeted from 2006 to 2009 and took years to recover, leaving the market undersupplied just when millennials began looking to buy homes. Then they were hit in the face with mortgage rates surging in 2022 — translating into home sellers staying put after having refinanced their homes back during the pandemic. All dressed up and no place to go.

Some homeowners who bought their first homes in 2020 or 2021 now have children and need to upgrade, said Denver-based agent Elle Pappas, who admits that when she once helped clients strategize about how to win bidding wars, they’re now holding out for a deal.

WSJ,TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways today. The MBS market improved by +25 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Geopolitical, 2) Central Banks and 3) Retail Sales.

1) Geopolitical: Israel/Iran will continue to dominate the landscape as will correlating oil price changes. The "Big Beautiful Bill" and deficits are still very much in focus as well. We also have a very important G7 meeting this week.

2) Central Banks: The Federal Reserve Open Market Committee (FOMC) will give us their latest Interest Rate Decision and Policy Statement on Wednesday at 2 pm ET. While no one expects a rate move at this time, we do get their Summary of Economic Projections (dot plot chart) which is their key method of communicating future Fed action. This will be followed by a live presser with Fed Chair Powell. But our Fed is not the only Central Bank this week, we also get key interest rate decisions and policies from the Bank of Japan and the Bank of England.

3) Retail Sales: After a relatively flat Retail Sales report in April, the May headline reading is expected to dip to -0.6% with the core around 0.2%.

Treasury Auction: We have an important 20Y Treasury Bond auction today.

This Week's Potential Volatility: High

This morning markets moving sideways. Volatility has started low but could increase on any of our hot button items this week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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