The total number of homes for sale in the U.S. dropped 7.1% year-over-year in May to 1.4 million on a seasonally adjusted basis, the lowest level in Redfin’s records, which date back to 2012. New listings fell 25% to the third lowest level on record, a downturn largely propelled by soaring interest rates that are discouraging sellers from relocating and refinancing.
That shortage of for-sale housing is leading to heated bidding wars and keeping prices high throughout much of the country. Roughly 37% of homes that sold in May went for more than their list price, Redfin reports.
Nearly every homeowner with a mortgage has an interest rate below 6%, meaning many are opting to stay put because selling and buying a new home would mean taking on a higher monthly mortgage payment. The average 30-year-fixed mortgage rate in May was 6.43%, up from 5.23% a year earlier and a record low of 2.65% in 2021.
Housing supply had already been lacking for years due to a steep dropoff in homebuilding following the 2008 financial crisis. The shortage intensified in 2020 and 2021 because rock-bottom mortgage rates prompted scores of people to buy homes.