US home listings hit 2-year high as affordability crisis halts buyer demand

Supply Climbs While Buyer Demand Stalls

New home listings were up 8% compared to the same period last year. Total active listings increased 0.4% on the week to roughly 1.51 million homes, and months of supply rose to 4, up from 3.7. The market is shifting toward balance.

But buyer activity tells a different story. Pending home sales dropped 0.1% week-over-week, while pending sales declined 2.5% year-over-year. More inventory isn't translating to more closed deals. Months of supply in the 4-to-5-month range is generally considered a balanced market by economists, yet the data suggests buyers have simply stepped back.

The Affordability Wall

The typical home sale price was $398,632, up 2.2% from a year ago. Prices remain elevated. What's changed is the financing cost. Mortgage rates were sitting at 6.66% for a 30-year fixed loan, near the yearly high.

The median monthly mortgage payment was estimated at $2,592, representing a record low in housing affordability. The math is brutal. A $400K home at a 6.66% mortgage rate costs roughly $600 more per month than the same home would have cost at sub-3% rates available in early 2021. Over a 30-year loan, the additional cost from higher mortgage rates amounts to more than $200K in additional interest payments.

Locked-In Owners and Frozen Supply

Homeowners who locked in sub-4% mortgage rates during 2020 and 2021 remain effectively anchored to their current properties due to the cost of trading up. They're not selling. Yet new construction continues, and existing home sellers (without the luxury of holding) must list.

"More sellers are entering the market, but buyers aren't biting as mortgage rates and prices push affordability to record lows"

The result: more homes are being listed while fewer contracts are getting signed. Rising inventory without rising sales pressure prices sideways while the affordability crisis deepens.