Shortage of Homes for Sale Propping Up Housing Values

There are plenty of higher-priced, and higher-valued homes to look at in many parts of the country, but elevated mortgage rates and sellers’ reluctance is making their sale difficult.

U.S. homes’ overall value rose 0.4% ($166.2 billion) from a year earlier in June and 19.1% ($7.5 trillion) from two years earlier, Redfin reported.

The total worth of U.S. homes hit a record $46.8 trillion in June, according to Redfin. This overtakes the prior all-time high of $46.6 trillion set a year earlier, as a shortage of homes for sale propped up housing values.

The housing market has now offset the $2.9 trillion decline in value—set off by rising mortgage rates—that occurred from June 2022 through February 2023, Redfin said.

Affordable markets, it reported, including Little Rock and Milwaukee, saw the biggest jumps in value, while more expensive West Coast metros, especially in Los Angeles, and pandemic boomtowns, faced large drops.

Suburban and rural homes rose more than those in urban areas overall.

“Home sales were down due to higher mortgage rates and limited inventory,” National Association of Realtors’ Chief Economist Lawrence Yun said in prepared remarks. “Affordability challenges are easing due to moderating and, in some cases, falling home prices, while the number of jobs and incomes are increasing.

“Interestingly, price declines occurred in some of the fastest job-creating markets. Prices in these areas are trying to land on better fundamentals after several years of skyrocketing increases. In fact, the number of homes receiving multiple offers, alongside continuing job and wage gains, signal price slides may already be a thing of the past.”

Median Home-Sale Price Up Most Since November

The median U.S. home-sale price rose 3% in July, the biggest increase since last November. Prices are rising faster for high-end homes, with the median sale price of U.S. luxury homes up 4.6% year over year to $1.2 million in the second quarter.

Last week, the National Association of Home Builders reported less than half of the new and existing homes sold between the beginning of April and the end of June were affordable to families earning the U.S. median income of $96,300.

However, today’s elevated mortgage rates are discouraging potential home sellers.

For example, in February, the share of million-dollar-plus homes hit a 12-month low, but Redfin reported that in July it “is on the upswing” as scarce inventory drives prices up.

Approximately 8% of U.S. homes are worth $1 million or more, near the all-time high of 8.6% from June 2022.

“The supply shortage is making many listings feel hot,” said Redfin Economics Research Lead Chen Zhao said in a prepared statement.

“In most of the country, expensive properties that are in good condition and priced fairly are attracting buyers and in some cases bidding wars, mostly because for-sale signs are few and far between right now.

“Still, there’s no rush to offload high-value homes. Recent economic signals that the U.S. may avoid a broad recession could cause high-end buyers to feel more confident in making a major purchase in the coming months. There may be more demand coming down the pipeline.”