MINT HILL, NC – Pending sales have dropped, inventory is going up, price reductions are the new normal, and higher mortgage rates might be leading to a pop in the housing market bubble. For about two years, there was an inventory shortage. This made home prices skyrocket.
Something that wasn’t talked about much was the high number of homeowners that bought a new home and didn’t sell their old home. The plan was to ride the hot real estate market and get a higher price, but if they haven’t sold those vacant homes, it might be too late.
This type of home inventory is known as shadow inventory and it’s starting to hit the market now. As mortgage rates spike and sales are dropping, these homeowners are trying to unload this inventory as fast as possible.
This is Just the Beginning of the Pop
With active listing jumping by about 20% in June and sales dropping, this is just the beginning. Pending sales in June were down 16% year-over-year, which followed a 12% drop in May and a 9% drop in April.
Buyers are starting to lose interest in the very high home prices and the rising mortgage rates. June was actually the 10th month in a row where the year-over-year pending sales dropped.
New listings in June also went up with about 562K homes hitting the market. This was the second highest June with only June 2019 being higher. Typically, new home listings peak in May and drop in June.
One of the biggest factors to the possibility of a bubble pop is the price reductions. About 50% more price reductions happened in June, which signals a sudden reset in the market. More sellers are starting to realize buyers aren’t interested in the high prices on the market today.
Of course, a big part of what is causing the slowing market is the higher mortgage rates. With the 30-year fixed mortgage rate going up to about 6%, many are looking at adjustable-rate mortgages or just deciding not to buy right now. Higher mortgage rates are also pricing many buyers out of the market.
Areas Where Active Listings Has Exploded
There are a few areas in the country where active listings have gone up by more than 100% year-over-year. These include the Austin-Round Rock market in Texas, the Phoenix-Mesa-Scottsdale market in Arizona, and the Raleigh market in North Carolina.
Several other markets have seen a year-over-year change of more than 50%. The Charlotte-Concord-Gastonia market in North Carolina and South Carolina is sitting at 37% year-over-year. When looking at the top 50 metro areas in the country only 12 have seen no increase or a negative percentage.
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