Pent-up supply suddenly appears – those vacant homes that no one thought were vacant.
By Wolf Richter for WOLF STREET.
For the past two years, the story was that there was no inventory to sell, there was a housing shortage, and that’s why prices were skyrocketing. Then there were other people like me who repeatedly pointed out that people don’t put their old houses on the market after they buy a new house, and that these people now own two or three houses and that they were going to get into the hottest real estate market ever where prices were going up 20% or 30% or more a year, and then they were going to sell these vacant houses that no one had ever considered vacant.
And because they were already living in a house, they could sell their vacant houses without having to buy another house. It’s the “hidden stock” that’s hitting the market now, just as mortgage rates have skyrocketed and sales are plunging. And to shake things up, the price cuts are exploding.
Pent-up supply, plummeting sales: it’s only the beginning, but it’s happening.
Active registrations jumped in June of 20% from May and 19% from a year ago, the second consecutive year-over-year increase, after an 8% jump in May, and both were the first year-over-year increases since June 2019. There were approximately 98,000 After homes listed for sale in June than a year ago, according to data from the National Association of Realtors today (data from realtor.com):
Active listings jumped for two reasons:
ONE, June pending sales plunged 16% year-over-year, after May’s 12% drop and April’s 9% drop, as potential buyers lost interest in sky-high house prices and Holy-moly mortgage rates. These are advertisements at various stages of the sales process, but before the transaction is concluded. June was the 10th consecutive month of year-over-year declines. In June, the NAR reported that May “closed” sales also fell for the 10th consecutive month. And that doesn’t bode well for sales that closed in June:
TWO, new listings increased in June to 562,000 households, the second highest June in years, trailing only June 2019. And interestingly, new listings pink in june, whereas in a normal year, they peak in May and fall in June. I have circled the previous June months (data via realtor.com).
Price drops are exploding 50% in June from May and approximately doubled year on year as sellers try to get buyers to show up and take a peek as foot traffic has plummeted and bidding wars have become fond memories. This is a sudden reset. But more and more sellers are grappling with a new reality: Prices have to go where the buyers are, and the buyers are somewhere, but they’re much lower (data via realtor.com):
Holy-moly Mortgage Rates – so called because that’s what people say between their teeth when they first see the mortgage payment for a house they want to buy – hover around 6% for a fixed rate mortgage of 30 years old, about double what they were in 2020 (data via realtor.com).
This type of mortgage rate, which doubled not too long ago, and home prices that have shot up 40% or more in the same two-year period are a toxic mix. Something has to give, and it won’t be the buyers – because they can’t, they’re stuck – but the sellers. Or there is no deal.
And buyers who could buy, the infamous spot buyers, they do not want buy at these prices either, now that madness is whistling out of the market. Nobody wants to overpay at the insane top of what used to be a totally crazy market.
Huge difference in listings among top 50 metros.
Among the 50 largest cities, active listings in June rose the most in Austin (+144% year-over-year), Phoenix (+113%) and Raleigh (112%). In 31 other metros, active listings jumped to double digits. And current listings have only fallen in a handful of cities, topped by Chicago (-13%), Virginia Beach (-14%) and Miami (-16%).
The table is sorted by year-over-year percentage change in active listings (data via realtor.com):
|Largest metros, active listings, June 2022||% change year over year|
|Austin Round Rock, TX||144%|
|Raleigh, North Carolina||112%|
|Salt Lake City, UT||98%|
|Riverside-San Bernardino-Ontario, CA||72%|
|Dallas-Fort Worth-Arlington, TX||62%|
|Tampa-St. Petersburg-Clearwater, Florida||56%|
|San Antonio-New Braunfels, TX||54%|
|San Francisco-Oakland-Hayward, California||46%|
|Las Vegas-Henderson-Paradise, NV||45%|
|Oklahoma City, OK||37%|
|San Jose-Sunnyvale-Santa Clara, CA||34%|
|Kansas City, Missouri||28%|
|San Diego-Carlsbad, California||25%|
|Atlanta-Sandy Springs-Roswell, Georgia||23%|
|Louisville/Jefferson County, KY-IN||22%|
|Los Angeles-Long Beach-Anaheim, CA||20%|
|New Orleans-Metairie, LA||16%|
|Buffalo-Cheektowaga-Niagara Falls, NY||13%|
|Houston-The Woodlands-Sugar Land, TX||ten%|
|St. Louis, MO-IL||5%|
|New York-Newark-Jersey City, NY-NJ-PA||0%|
|Minneapolis-St. Paul-Bloomington, MN-WI||0%|
|Milwaukee-Waukesha-West Allis, WI||-4%|
|Virginia Beach-Norfolk-Newport News, VA-NC||-14%|
|Miami-Fort Lauderdale-West Palm Beach, Florida||-16%|
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