Dammed up supply suddenly appears – the vacant homes that no one considered vacant.
By Wolf Richter for WOLF STREET.
In the last two years, the story was that there was no inventory for sale, that there was a shortage of housing, and that was why prices skyrocketed. Then there were others like me who repeatedly pointed out that people did not put their old homes on the market after they had bought a new home, and that these people now owned two or three homes and that they should travel to ride it up hottest real estate market ever where prices rose by 20% or 30% or more per year, and then they wanted to sell the vacant homes that no one had ever considered vacant.
And because they already lived in a home, they could sell their vacant homes without having to buy another home. This is the “shadow stock”[ads1]; that is now coming on the market, just when mortgage rates have risen and sales are plummeting. And to get things moving, price reductions are increasing.
Dammed supply, sales plummet: it’s just the beginning, but it’s happening.
Active listings skipped in June by 20% from May, and by 19% from one year ago, the second increase from year to year in a row, after a jump of 8% in May, and both were the first increases from year to year since June 2019 That was around 98,000 more homes listed for sale in June than a year ago, according to data from the National Association of Realtors today (data on realtor.com):
Active listings skipped for two reasons:
ONE, pending sales in June fell by 16% year-on-year, after falling by 12% in May and falling by 9% in April, when potential buyers lost interest in sky-high house prices and mortgage rates. These are listings at different stages of the sales process, but before the agreement is terminated. June was the 10th month in a row with decline from year to year. Back in June, NAR had reported that “closed” sales in May also fell for the 10th month in a row. And this does not bode well for closed sales in June:
TWO new listings rose in June to 562,000 homes, the second highest June in recent years, behind only June 2019. And interestingly, new listings rose in June, when in normal years they peaked in May and fell in June. I circled about last June (data via realtor.com).
Price reductions increased by 50% in June from May and about doubled year over year, while sellers try to get buyers to show up and take a look as foot traffic has fallen and bidding wars have fallen back to fond memories. This is a sudden reset. But more sellers are embracing a new reality: Prices must go where buyers are, and buyers are around somewhere, but they are 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 for a home they want to buy – fluctuates around 6% for a 30-year fixed-rate loan, about double where they had been in 2020 (data via realtor.com ).
This type of mortgage interest rate, after doubling not so long ago, and house prices that have increased by 40% or more during the same two-year period constitute a toxic mixture. Something has to give, and it will not be the buyers – because they can not, they are boxed in – but the sellers. Or there is no deal.
And buyers who could buy, the infamous cash buyers, the will not buy at those prices either, now that the madness is rushing out of the market. No one wants to pay too much on the crazy top of what was a completely crazy market.
Big difference in entries among the 50 largest metros.
Among the 50 largest metro areas, the number of active listings in June increased most in Austin (+144% year-over-year), Phoenix (+113%) and Raleigh (112%). In 31 other cities, active double-digit listings rose. And active listings fell in just a handful of metros, led by Chicago (-13%), Virginia Beach (-14%) and Miami (-16%).
The table is sorted by year-over-year percentage change of active listings (data via realtor.com):
|Largest metros, active listings, June 2022||% change on an annual basis|
|Austin-Round Rock, TX||144%|
|Salt Lake City, UT||98%|
|Nashville-Davidson – Murfreesboro – Franklin, TN||86%|
|Riverside-San Bernardino-Ontario, CA.||72%|
|Sacramento – Roseville – Arden-Arcade, CA.||65%|
|Dallas-Fort Worth-Arlington, TX||62%|
|Tampa-St. Petersburg-Clearwater, FL||56%|
|San Antonio-New Braunfels, TX||54%|
|San Francisco-Oakland-Hayward, CA.||46%|
|Las Vegas-Henderson-Paradise, NV||45%|
|Oklahoma City, OK||37%|
|San Jose-Sunnyvale-Santa Clara, CA.||34%|
|Kansas City, MO||28%|
|San Diego-Carlsbad, CA.||25%|
|Atlanta-Sandy Springs-Roswell, GA||23%|
|Louisville / Jefferson County, KY-IN||22%|
|Los Angeles-Long Beach-Anaheim, CA.||20%|
|New Orleans-Metairie, LA||16%|
|Buffalo-Cheektowaga-Niagara Falls, NY||1.3%|
|Houston-The Woodlands-Sugar Land, TX||10%|
|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%|
|Chicago-Naperville-Elgin, IL-IN-WI||-1. 3%|
|Virginia Beach-Norfolk-Newport News, VA-NC||-14%|
|Miami-Fort Lauderdale-West Palm Beach, FL||-16%|
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