There is still plenty of demand for housing. Potential buyers, both young and old are trolling listings online and packing in to crowded open houses. But they are not rushing to write offers. The culprit may be sticker shock.
While buyers in June were still requesting tours at the same rate as May, 11 percent fewer were putting pen to paper on an offer, according to Redfin, a real estate brokerage which surveyed 15 major metropolitan housing markets. The same is true, however, throughout much of the nation.
"In this market, homebuyers have to move fast, yet high prices and low inventory are slowing down even the most earnest of house hunters," said Nela Richardson, chief economist at Redfin. "Buyers toured in full force last month, even though there were fewer homes hitting the market. New listings fell 3.3 percent from May and were down 1.6 percent from a year ago. Faced with a low supply of homes for sale and extremely competitive conditions, many homebuyers are struggling to make it to the offer stage."
The trend likely followed into July as well, as mortgage applications to purchase a home have fallen for three out of the past four weeks, according to the Mortgage Bankers Association.
The supply situation is only getting worse. Redfin found listings down 12 percent in June compared with a year ago in the markets it covers, but a wider survey from the U.S. Census shows the supply of existing homes, on a per capita basis, nationwide in the second quarter of this year was at the lowest level since 1982, when the government began tracking this data.
The number of vacant homes is at a 17-year low. All this due to the sharp decline in home construction after the last housing crash and soaring demand from first-time buyers who were sidelined during the recession.
The supply of homes for sale in July was down 11 percent annually, and homes were selling on average four days faster. Normally the housing market slows in summer and prices drop slightly, but that has not been the case this year.
"Homes are not only selling faster than last July, but faster than last year's peak months. However, quick sales don't necessarily mean more sales, particularly when there isn't enough inventory as is currently the case," said Javier Vivas, manager of economic research at Realtor.com.
"Home prices also remain stubbornly high, failing to show hints of the usual seasonal cooldown. Low and moderately priced homes are being snatched up especially quickly, keeping many would-be buyers from being able to get into the market."
Home prices in some major markets are now overvalued, when compared with local incomes. While mortgage rates have remained low, the expectation is that they will move higher toward the end of this year, which could sideline even more would-be buyers.